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COMPETITIVE ASSESSMENT 
OF THE U.S. METALWORKING 
MACHINE TOOL INDUSTRY 


Report to the United States 
International Trade Commission 
on Investigation No. 332-149 
Under Section 332 of the 
Tariff Act of 1930 


USITC PUBLICATION 1428 


SEPTEMBER 1983 



United States International Trade Commission / Washington, D.C. 20436 







UNITED STATES INTERNATIONAL TRADE COMMISSION 


COMMISSIONERS 

Alfred E. Eckes, Chairman 
Paula Stern 
Veronica A. Haggart 
Seeley G. Lodwick 


Kenneth R. Mason, Secretary to the Commission 


This report was prepared principally by 
Charles M. West, Dennis A. Fravel, and Ronald J. DeMarines 


Machinery and Equipment Division 
Jerry Tempalski, Office of Economics 


Office of Industries 
Norris A. Lynch, Director 


Address all communications to 
Office of the Secretary 
United States International Trade Commission 
Washington, D.C. 20436 









PREFACE 


VI t) m3 
AU CqS 
IW 

On December 1, 1982, on its own motion and in accordance with section 
332(b) of the Tariff Act of 1930 (19 U.S.C. 1332 (b)), the United States 
International Trade Commission instituted investigation No. 332-149, a 
competitive assessment of the U.S. metalworking machine tool industry. This 
study examines the factors affecting the present and future international 
competitive position of U.S. metalworking machine tool producers. It assesses 
the impact of the growing competition from imports on the U.S. metalworking 
machine tool industry, explores the related development of further competition 
in the industry's overseas markets, and examines the steps that have been and 
may be taken to counteract these developments. Notice of the investigation 
was given by posting copies of the notice of investigation at the Office of 
the Secretary, U.S. International Trade Commission, Washington, D.C., and by 
publishing the notice in the Federal Register (47 F.R. 55343, Dec. 8, 1982) 
(app. A). 

In the course of this investigation, the Commission collected data from 
questionnaires sent to 200 producers, 100 importers, and 100 purchasers of 
metalworking machine tools. Responses were received from 140 producers, 52 
importers, and 57 purchasers. A public hearing in this matter was held on 
June 28, 1983, in the Commission’s hearing room in Washington, D.C., and 
testimony was received from U.S. metalworking machine tool producers, foreign 
metalworking machine tool producers, and importers of metalworking machine 
tools (app. B). Additionally, information was obtained from published 
sources, from questionnaire responses prepared by overseas posts of the U.S. 
Department of State, from interviews with corporate executives representing 
producers, importers, and purchasers of metalworking machine tools, from the 
Commission’s files, and from other sources. 












































































































































































Page 


• • • 
m 

CONTENTS 


Preface- i 

Executive summary- ix 

Description and uses- 1 

The world industry and world market: 

World production- 4 

World imports- 7 

World exports- 9 

World consumption- 13 

Productivity of world machine tool producers- 13 

Effect of exchange rates on the machine tool industry- 17 

The U.S. industry and major foreign competitors: 

Industry profiles: 

United States- 18 

Industry- 18 

Government involvement- 36 

Japan- 47 

Industry- 47 

Government involvement- 50 

European Community- 55 

West Germany: 

Industry- 57 

Government involvement- 59 

Italy: 

Industry- 61 

Government involvement- 64 

United Kingdom: 

Industry- 65 

Government involvement- 66 

France: 

Industry- 69 

Government involvement- 70 

Other countries- 73 

U.S.S.R.: 

Industry- 73 

Government involvement- 74 

East Germany: 

Industry- 76 

Government involvement- 79 

Switzerland: 

Industry- 80 

Government involvement- 82 

Romania: 

Industry- 82 

Government involvement- 84 

People’s Republic of China: 

Industry- 85 

Government involvement- 87 






































iv 

CONTENTS 

Page 

The U.S. industry and major foreign competitors—Continued 
Industry profiles—Continued 
Other countries—Continued 
Spain: 

Industry- 

Government involvement- 90 

Taiwan: 

Industry- 90 

Government involvement- 92 

Republic of Korea: 

Industry- 93 

Government involvement- 95 

Factors of competition: 

Inventories- 97 

Raw materials, capital, and labor availability and cost- 98 

Technology level: 

Manufacturing technology- 99 

Product technology- 103 

Product quality- 104 

Product price- 105 

Marketing- 111 

The U.S. market: 

Description of the market- 116 

Consumption- 116 

Analysis of interaction of domestic and foreign products in the 

U.S. market- 117 

Future trends: 

Next-generation products- 120 

Appendix A. Notices of institution and termination of previous 

machine tool investigation No. 332-138 and notices of institution and 

modification of investigation No. 332-149- 123 

Appendix B. Calendar of public hearing- 131 

Appendix C. Portions of the Tariff Schedules of the United States 
Annotated (1983) relating to U.S. import classifications of metal¬ 
working machine tools- 137 

Appendix D. Basic machine tool operations used in U.S. industry- 147 

Appendix E. A discussion of the effects of exchange-rate changes among 

major U.S. trading partners on the competitiveness of U.S. products — 153 

Appendix F. Statistical tables- I 57 

Appendix G. National Science Foundation,Production Research Program, 

fiscal year 1983- 175 

Appendix H. The European Community’s program for its machine tool 

industry- 179 

Figures 

1. Metalworking machine tools: Production, by specified countries, 

1977-82- 5 

2. Metalworking machine tools: The value of production of machine 

tools as a percent of GNP for major machine tool producing 

countries, 1977-82- 8 
































V 


CONTENTS 

Page 

3. Metalworking machine tools: Exports, by specified countries, 

1978-82- 10 

4. Metalworking machine tools: Exports as a share of domestic 

production, by specified sources, 1977 and 1982- 11 

5. Metalworking machine tools: Exports as a share of total world 

exports, by specified sources, 1977 and 1982- 12 

6 . Metalworking machine tools: Consumption, by specified countries, 

1977-82- 14 

7. Metalworking machine tools: Imports as a share of apparent 

domestic consumption, by specified countries, 1977-82- 15 

8 . Metalworking machine tools: U.S. shipments, 1962-82- 27 

Tables 

1. Metalworking machine tools: Percentage distribution of world 

production, by major producing countries, 1977-82- 6 

2. Metalworking machine tools: Imports, by specified countries, 

1977-82- 7 

3. Metalworking machine tools: Value of production per employee 

(productivity) for the major, non-Communist producing 

countries, 1977-82- 16 

4. Average number of employees in U.S. establishments producing 

metalworking machine tools, by major types, 1977-82- 20 

5. Man-hours worked by and wages paid to U.S. production and related 

workers producing metalworking machine tools, by major types, 

1977-82- 21 

6 . Metalworking machine tools: U.S. producers’ domestic shipments, 

by major types, 1977-82- 22 

7. Metalworking machine tools: U.S. producers’ domestic shipments 

of numerically controlled lathes and machining centers, 1977- 
82- 23 

8 . Metalworking machine tools: U.S. producers' exports of numerically 

controlled lathes and machining centers, 1977-82- 24 

9. Metalworking machine tools: U.S. importers’ shipments of 

numerically controlled lathes and machining centers, 

1977-82- 24 

10. Metalworking machine tools: U.S. imports of numerically controlled 

lathes and machining centers, 1977-82- 25 

11. Metalworking machine tools: Comparison of U.S. producers’ ship¬ 

ment data from the U.S. Department of Commerce, the National 
Machine Tool Builders’ Association (NMTBA), and the U.S. 

International Trade Commission, 1977-82- 26 

12. Metalworking machine tools: U.S. imports for consumption, by 

major types, 1977-82- 29 

13. Metalworking machine tools: U.S. importers’ domestic shipments, 

by major types, 1977-82- 29 

14. Metalworking machine tools: U.S. producers’ export shipments, 

by major types, 1977-82- 30 

15. Metalworking machine tools: U.S. producers’ capital expenditures 

for domestic facilities, by major types, 1977-82- 31 
























vi 

CONTENTS 

Page 

16. Metalworking machine tools: U.S. producers' research and develop¬ 

ment expenditures, by major types, 1977-82- 32 

17. Metalworking machine tools: U.S. producers’ net sales and net 

operating income, by major types, 1977-82- 33 

18. Metalworking machine tools: Effects of $100 million loss in U.S. 

production of metalworking machine tools on the output and 
employment in all U.S. industry sectors- 34 

19. Manufacturing Technology Program funding levels, by branches, 

fiscal years 1978-82- 38 

20. National Science Foundation Production Research Program and 

Augmentation funding, fiscal years 1980-84- 41 

21. NBS’s Center for Manufacturing Engineering budget, by programs, 

fiscal years 1982-84- 43 

22. Eximbank support for the machine tool industry, by types of 

program, as of Dec. 31, 1982- 44 

23. Metalworking machine tools: Patent activity for metalworking 

machine tools and controls for machine tools in the U.S. Patent 
System, by origins, 1977-82- 46 

24. Number of employees in the Japanese metalworking machine tool 

industry, by major types, 1977-82- 48 

25. Metalworking machine tools: U.S.S.R. production, by major types, 

1977-82- 74 

26. Metalworking machine tools: Combines in the East German industry, 

1981- 77 

27. Metalworking machine tools: Romanian production, by types, 

1977-81- 84 

28. Metalworking machine tools: Machines in use by U.S. producers 

of machine tools, by ages, as of Dec. 31, 1982- 100 

29. U.S.- and foreign-made machine tools: U.S. purchasers* reasons 

for purchases, 1980-82- 104 

30. Numerically controlled lathes: Average price of U.S. domestic ship¬ 

ments, by types, 1977-82- 105 

31. Numerically controlled lathes: Average price of U.S. export 

shipments, by types, 1977-82- 106 

32. Numerically controlled lathes: Average price of U.S. imports, by 

types, 1977-82- 106 

33. Numerically controlled lathes: Average price of U.S. importers’ 

shipments, by types, 1977-82- 106 

34. Machining centers: Average price of U.S. domestic shipments, by 

types, 1977-82- 108 

35. Machining centers: Average price of U.S. export shipments, by 

types, 1977-82- 108 

36. Machining centers: Average price of U.S. imports, by types, 

1977-82- 109 

37. Machining centers: Average price of U.S. importers’ shipments, by 

types, 1977-82- 109 

38. Metalworking machine tools: Percentage distribution of U.S. 

producers’ domestic shipments, by market channels, 1977-82- 111 

39. Metalworking machine tools: Percentage distribution of U.S. 

importers’ shipments, by market channels, 1977 and 1982- 112 



























VI 1 


CONTENTS 

Pa&e 

40. Capital expenditures in the U.S. aerospace, automobile, and oil¬ 

field machinery industries, 1977-82- 117 

41. Metalworking machine tools: U.S. purchasers’ consumption of U.S.- 

produced articles, by major types, 1977-82- 119 

42. Metalworking machine tools: U.S. purchasers’ consumption of 

imported articles, by major types, 1977-82- 119 

43. Metalworking machine tools: U.S. purchasers' estimated future 

consumption, 1983-90- 120 

F-l. Metalworking machine tools: U.S. Air Force acquisitions, by 

sources, fiscal years 1978-82- 159 

F-2. Metalworking machine tools: U.S. Navy acquisitions, by sources, 

fiscal years 1978-82- 160 

F-3. Metalworking machine tools: U.S. Army acquisitions, by sources, 

1978-82- 161 

F-4. Metalworking machine tools: U.S. Air Force acquisitions of foreign- 

made machine tools, by sources, fiscal years 1978-82- 162 

F-5. Metalworking machine tools: U.S. Navy acquisitions of foreign- 

made machine tools, by sources, fiscal years 1978-82- 163 

F-6. Metalworking machine tools: U.S. Army acquisitions of foreign- 

made machine tools, by sources, 1977-82- 164 

F-7. Metalworking machinery and machine tools: Eximbank authori¬ 
zations, fiscal years 1977-82- 165 

F-8. Metalworking machine tools: Number of U.S. patents granted in 

the U.S. Patent System, by selected countries, 1977-82- 166 

F-9. Controls for machine tools: Number of patents granted in the U.S. 

Patent System, by selected countries, 1977-82- - 167 

F-10. Numerically controlled lathes: U.S. purchasers’ consumption of 

domestically produced and imported products, 1977-82- 168 

F-ll. Machining centers: U.S. purchasers’ consumption of domestically 

produced and imported products, 1977-82- 168 

F-12. Imported metalworking machine tools: Principal foreign sources, 

by number of responses, 1977-82- 169 

F-13. Metalworking machine tools: Nontariff barriers experienced by 
U.S. producers in foreign markets, by number of responses, 

1977-82- 171 

























' 











































































































IX 


EXECUTIVE SUMMARY 

The U.S. machine tool industry is concerned about the decline in its 
competitive position in domestic and foreign markets in recent years. During 
1977-82, the worldwide machine tool market was characterized by two distinct 
trends. First, during 1977 to early 1981, the United States (and most all 
major machine-tool-producing countries) experienced a tremendous growth in the 
production and use of machine tools following the increased emphasis on 
automation in most major manufacturing industries. 

Then, as the impact of the recession hit the world machine tool industry 
during late 1981 and 1982, U.S. and foreign machine tool production, exports, 
and consumption dropped substantially. Although the changes in the world 
machine tool industry affected all major machine tool countries, the impact on 
the U.S. machine tool industry appeared to be generally more severe than that 
on other countries, especially in areas of production, exports, employment, 
and capacity utilization. 

The major findings of this study are summarized below. 

1. Structure of the domestic and foreign industry 

o The U.S. machine tool industry is currently the world’s second 

largest behind Japan . 

Until 1981, the United States and West Germany were the world’s 
leading producers of machine tools; the United States surpassed West 
Germany in 1979 to rank first in world machine tool production during 
1979-81. The surge in Japan’s production of machine tools propelled it 
past the Soviet Union in 1979, past West Germany in 1981, and then past 
the United States in 1982 into its current position as the leading 
machine-tool-producing country, accounting for 17.1 percent of total 
world production. The increases in Japan's machine tool production 
during 1977-82 were, in part, a result of more than 20 years of 
Government intervention in the machine tool industry. During the 
growth years 1977-81, U.S. machine tool production, by value, increased 
109 percent, and that of Japan increased 200 percent. 


o The U.S. machine tool industry is generally composed of smaller and 

more specialized producers than that of all other major foreign 

competitors except Japan . 

The average number of employees per machine tool firm in the United 
States was 77 in 1982, the lowest among major machine-tool-producing 
countries, with the exception of Spain and Japan. In the United 
States, the top 10 firms together account for approximately 40 percent 
of total employment. Data on Japan’s metal-cutting machine tool 
employment for 1980 indicate that 1,972 machine tool producers together 
employed approximately 37,000 workers in 1982, or an average of 17 
employees per firm. The majority of Japanese machine tool producers 
employ less than 10 persons. Italy's machine tool industry employs 







X 


an estimated 84 workers per firm; Spain’s industry, 61 workers; 
Switzerland’s industry, 94 workers; and France's industry, 115 
workers. The United Kingdom and West Germany have the largest 
concentration of workers per firm, with 215 and 225 workers, 
respectively. Data are not available for the U.S.S.R. 


o Capacity utilization in the U.S. machine tool industry has dropped 

significantly from its peak in 1979 . 

Capacity utilization in the U.S. metalworking machine tool industry, 
according to respondents to the Commission's survey, increased from 69 
percent in 1977 to 76 percent in 1979, and plummeted to 36 percent by 
the end of 1982. At the same time, respondents indicated that capacity 
to produce metalworking machine tools increased 15 percent from 1977 to 
1982, primarily through the expansion of facilities and purchases of 
new equipment. 


o Mergers and acquisitions were not significant in number in terms 

of total number of firms in the industry during 1977-82, but are 

expected to increase in the near future . 

There were at least 64 mergers, acquisitions, and purchases of 
corporate assets in the U.S. metalworking machine tool industry during 
1977-82 and 4 have occurred during January-May 1983. These mergers and 
acquisitions have involved principally larger companies acquiring 
smaller companies. There has been a trend toward foreign acquisition 
of U.S. machine tool companies by manufacturers based in the United 
Kingdom, West Germany, and Japan. Antitrust investigations involving 
mergers and acquisitions have been minimal. 

In public hearings at the Commission regarding the U.S. metalworking 
machine tool industry's competitive status, industry representatives 
stated that the failure rate for firms in the industry would increase 
in the next 6 months, with a number of defunct firms being acquired by 
larger companies. 


o Expenditures for research and development on machine tools are often 

partly supported by Government funds in the United States and 

other ma.jor producer countries . 

The majority of Governments of the top nine countries which 
currently export machine tools into the U.S. market have established or 
sponsored programs dedicated to machine tool development as opposed to 
supporting basic research in the area of manufacturing. Those 
countries having dedicated machine tool research facilities include 
Japan, Taiwan, and Switzerland, with the West German and Italian 
Governments sponsoring machine tool research at universities, often 
with industry participation. The United Kingdom sponsors programs in 
the area of information systems, which include Flexible Manufacturing 










xi 


Systems (FMS), Computer-aided design (CAD) and Computer-aided 
Manufacture (CAM), and robotics. 1/ 

The U.S. Government generally funds generic research and development 
(R&D) programs in many technologies not directly related to the machine 
tool industry, such as materials processing, computer applications, and 
electronics. Such R&D, however, can be applied to the manufacture of 
machine tools or in the product itself. U.S. Government-funded 
manufacturing research frequently is concerned with issues in machining 
or machine tools. However, the National Bureau of Standards and the 
U.S. Air Force fund programs which specifically benefit the machine 
tool industry and have direct application in nondefense production. 

The U.S. Department of Defense spends approximately $150 million to 
$200 million annually (projections for future years are about $300 
million annually) for its Manufacturing Technology program, which 
indirectly benefits the U.S. machine tool industry. 2/ 


o Major foreign machine tool producers are more likely to acquire 

capital outside the firm than are U.S. producers and, therefore, 

have greater access to capital . 

Historically, the U.S. machine tool industry has had difficulty in 
generating capital. Commission staff research of available documents 
and interviews with industry officials indicate that the small size of 
most U.S. producers and the cyclical nature of the industry have made 
it difficult for machine tool producers to secure external financing, 
and that few U.S. financial institutions are willing to invest in such 
a small, cyclical industry. This situation is reflected in the 
debt-to-equity ratios of U.S. firms, which are typically less than 50 
percent. Major foreign machine tool producers, on average, have more 
financial leverage. For example, Japanese firms typically have 
debt-to-equity ratios of 150 percent to over 550 percent, an indication 
that the Japanese machine tool companies have easier access to capital 
than their U.S. counterparts. Generally, the major European producers 
have debt-to-equity ratios that vary between 30 and 120 percent. 


o The production and assembly of foreign-designed metalworking machine 

tools are increasingly occurring in the United States . 

U.S. manufacturers are increasingly producing or assembling 
foreign-designed machine tools under license from foreign 


1/ FMS consist of one or more computer-controlled machine tools, other 
machinery (such as testing and inspecting machines), automated material- 
handling systems, and a central computer which controls the other three 
elements. CAD/CAM are systems in which computers are used to eliminate 
repetitive, time-consuming tasks (such as mathematical calculations of a tool 
path through a workpiece), and improve the accuracy and speed with which 
design and machining operations may be accomplished. 

2/ R. Donnelly, MTAG-81, Proceedings, Thirteenth Annual Tri-Service 
Manufacturing Technology Coordination Conference, San Diego, Calif., Nov. 
30-Dec. 3, 1981, p. 19. 








XI 1 


manufacturers, and at the same time, foreign manufacturers are 
establishing production or assembly facilities in the United States. 
Foreign manufacturers are either establishing new facilities or are 
acquiring U.S. manufacturers. Most notably, this is occurring among 
manufacturers from West Germany, Switzerland, and Japan. European 
firms have indicated that production or assembly in the United States 
is a reaction to increased Japanese competition in the U.S. market. 

The Japanese producers have stated, however, that production in the 
U.S. market is a way to minimize the increasingly protectionist mood in 
the U.S. machine tool industry. In addition, U.S. manufacturers are 
increasingly producing foreign-designed machine tools in order to 
maintain or expand their market share by augmenting their product line, 
mostly with standard, multiuse machine tools. 


2. The current U.S. market 

o The United States is the largest machine-tool-consuming; country; 

however, Japan experienced the most significant consumption growth 

during 1977-82 . 

During 1977-82, the United States was the largest consumer of 
machine tools in the world; U.S. consumption peaked in 1981 at almost 
$5.6 billion, representing a gain of 233 percent over the amount 
consumed in 1977, and then fell to $4.4 billion in 1982. During 
1977-81, Japanese consumption increased more than 200 percent to 
$3.3 billion in 1981 from $1.1 billion in 1977, the most significant 
increase of the 10 largest consuming countries. 


o Imports of machine tools constitute a growing share of the U.S. 

market . 

U.S. imports of machine tools increased from $401 million in 1977 to 
$1.49 billion in 1981, or by 259 percent, before declining to 
$1.3 billion in 1982. During 1977-81, U.S. imports as a share of 
apparent consumption grew from 16.7 percent to 26.6 percent, and 
increased to 29.5 percent in 1982. 


o The import share of domestic consumption of machines tools increased 

significantly more in the United States than in any other major 

machine-tool-consuming country . 

In the United States, imports as a share of domestic consumption 
increased to just under 30 percent in 1982 from 17 percent in 1977—a 
gain of nearly 13 percentage points. Import penetration was higher in 
France (61 percent in 1982) and the United Kingdom (61 percent in 
1982), however, the percentage increase in import penetration in the 
United States during 1977-82 exceeded that of all other major 
machine-tool-consuming countries during that period. Japan's import 
penetration, the lowest among major machine-tool-consuming countries, 
was only 8 percent in 1982. 










XI 1 1 


o The Japanese share of total U.S. imports increased significantly 

during; 1977-82, partially at the expense of West German and United 

Kingdom suppliers . 

In 1977, Japan accounted for $105 million, or 26 percent of total 
U.S. imports; West Germany accounted for $91 million, or 23 percent of 
the total; and the United Kingdom accounted for $446 million, or 11 
percent of the total. By 1982, the value of Japanese imports reached 
$535 million, or 41 percent of total U.S. imports, whereas imports from 
West Germany, valued at $204 million, accounted for only 16 percent, 
and those from the United Kingdom dropped to 9 percent of the 
total. 


o The distributor network in the United States plays an important role 

in the sales of off-the-shelf machine tools. 


Approximately two-thirds of the value of U.S. machine tool sales is 
accounted for by independent distributors. The remainder is marketed 
through company-owned distributors, or sold direct. For both U.S.-made 
and imported machine tools, highly specialized machines are sold 
primarily to the end user directly, whereas off-the-shelf (standard) 
machines are sold principally through independent distributors. 


3. Factors of competition in the United States 

o U.S.-made, standard-type machine tools are perceived by U.S. 

purchasers to be of a lesser quality than those of foreign 
manufacturers; however, the quality of the specialty U.S. machine 

tools are rated superior . 

Product quality entails not only the technology embodied in the 
product, but also performance features such as engineering design, 
productivity yield, durability, maintenance costs, and energy 
efficiency. The Commission’s survey of domestic machine tool 
purchasers revealed that certain foreign-made machine tools are 
generally perceived to be better designed than U.S.-made machine tools, 
have higher productivity, and require less maintenance. This appears 
to be especially applicable to standardized machines such as lathes and 
machining centers. However, U.S.-made machines for specialized 
applications for such industries as aerospace, fabricated-metal 
products, and transportation, are viewed by purchasers as superior to 
their foreign competitors’. A 1982 survey of U.S. purchasers by a 
private research group revealed that both specialized and standard 
U.S.-made machine tools maintained only a slight edge in engineering 
features, compared with foreign-made machine tools. 


o The average prices of U. S.-made numerically controlled lathes and 

machining centers were well above the average prices for imported 

like products, according to respondents to the Commission’s survey . 

According to responses of the producers and importers in Commission 
questionnaires, importers have a significant advantage in price over 














xiv 


U.S. producers of NC lathes and machining centers. U.S. domestic 
shipment prices of NC lathes in 1982 were, on average, $92,714 more 
than import shipment prices. U.S. domestic shipment prices of 
machining centers in 1982 were, on average, $89,000 above import 
shipment prices. 


j o U.S. machine tool manufacturers generally require longer lead times 

for delivery than do ma.jor foreign competitors. 

The length of the lead time from purchase order date to delivery 
appears to be an important factor in a successful machine tool sale, 
especially for manufacturers of standardized machines. Machine tool 
purchasers in the U.S. market indicate that foreign producers have 
gained market share in part because of their ability to provide more 
timely delivery. 


o U.S. machine tool producers generally provide better after-sales 

service on specialty machine tools than do their major foreign 

competitors, but U.S. producers are ranked lower in after-sales 

service for standard machines . 

After-sales service not only affects the reputation of the 
distributor (if the product is sold through such a network), but 
ultimately the manufacturer as well. This is especially true if the 
manufacturer sells directly to the customer. The quality of 
after-sales service is reflected in providing spare parts in a timely 
manner, implementing warranties and product servicing, communicating 
product changes to the customer, and customer training. 

According to the Commission’s survey of machine tool purchasers, in 
the U.S. marketplace, after-sales service for foreign-made standard 
machine tools, such as NC lathes and machining centers, appears to be 
superior to that for comparable U.S.-made machine tools. After-sales 
service for U.S.-made specialty machine tools, however, received a 
higher rating from U.S. purchasers than the comparable foreign-made 
products. 


o Inventories of foreign-built machine tools in the United States have 

grown substantially in recent years . 

The Commission’s survey of U.S. importers of metalworking machine 
tools indicated that as of December 1982, there were at least 5,246 
foreign-made machine tools in inventory in the United States, and this 
figure could have been as high as 12,000 units. 

According to a survey by the Japan Machine Tool Builders’ Association 
in 1982, of the 3,878 numerically controlled (NC) lathes and 2,180 
machining centers shipped to the United States in 1981, 2,500 and 










XV 


1,000, respectively, were considered to be in inventory. By the end of 
1982, estimates of unsold Japanese machine tools in the United States 
ranged between 5,000 and 10,000 units, worth up to $500 million. In 
late 1981 and throughout 1982, when demand for machine tools was 
severely depressed, large inventories of foreign-made machine tools led 
to price-cutting competition, with manufacturers' discounts of 15 
percent being commonplace. 


o U.S. manufacturers are competitive in the United States and world 

markets with respect to highly specialized machine tools and 

somewhat less competitive in the standard-type machine tools . 

The U.S. industry is regarded in world markets as the leader in high- 
technology machine tools that are designed for highly specialized 
operations. Such operations include aircraft component machining, 
military equipment machining, special health care equipment machining, 
and long assembly line operations such as those found in the automobile 
industry. In the standard-type machine tools, such as lathes and 
machining centers typically ordered by independent job shops, the U.S. 
equipment is perceived to be of lesser quality than that of major 
foreign producers, especially Japanese producers. 


4. Factors of competition in foreign markets 

o The value of U.S. exports of machine tools dropped in recent years as 

the U.S. share of the world market declined . 

In 1977, U.S. exports of metalworking machine tools were valued at 
$452 million, which represented 3.4 percent of world consumption of 
machine tools ($13.1 billion). This share of world consumption 
remained relatively unchanged through 1980. In 1981, U.S. exports were 
about $1 billion and represented 4.3 percent of world consumption, and 
the U.S. ranked as the third largest exporter of machine tools. The 
U.S. share decreased to 3.1 percent in 1982, when U.S. exports were 
$623 million and the U.S. fell to the sixth largest exporting country. 


o U.S. machine tool manufacturers export considerably less of their 

total production than do those in most other major producing; 

countries. 


During 1977-82, the United States exported between 16 and 19 
percent of domestic production, making its export-to-production ratio 
the second lowest among major machine-tool-exporting countries. Tradi¬ 
tionally, U.S. market demand was sufficient to absorb most of U.S. pro¬ 
duction. Foreign producers could not rely on their rather limited 
domestic market to the extent that U.S. producers could. West Germany 
consistently exported between 63 and 69 percent of its total production 
during 1977-82. Japan’s export-to-production ratio ranged between 33 
and 43 percent during the same period. Switzerland exported as much as 
89 percent of production, the United Kingdom exported as much as 67 per¬ 
cent, and Italy exported as much as 60 percent of domestic production. 










xv i 


o Most major producing; machine tool countries enjoy a competitive 

advantage over the United States because of labor and input costs 

and exchange rates . 

Most of the inputs used in the production of machine tools in any 
country are purchased from domestic sources. Approximately 60 percent 
of the inputs in the machine tool industry are labor, and much of the 
remaining AO percent consists of steel that is typically purchased 
domestically. Therefore, the evidence suggests that most foreign 
producers of machine tools have enjoyed an increase in competitiveness 
vis-a-vis that of the United States since 1976 because of the 
differences in relative inflation rates, labor costs, and changes in 
exchange rates. 


o Japan*s machine tool productivity has risen to twice that of the 

United States and all other major producing countries . 

Machine tool productivity among major machine-tool-producing 
countries increased significantly during 1977-80 (or 1981, depending on 
the particular country). Japan’s productivity gains during this period 
were the most pronounced among major producing countries, growing to 
$114,000 worth of production per employee in 1981 from $36,000 per 
employee in 1977, reflecting, in part, moves by Japanese producers to 
concentrate on mass production of standard-type machining centers and 
lathes as opposed to production of specialty machines. U.S. 
productivity in machine tools steadily increased, from $29,000 per 
employee in 1977 to $53,000 per employee in 1981, representing less 
than one-half the productivity of Japan. In 1982, U.S. productivity 
ranked third among major machine-tool-producing countries behind Japan 
and Switzerland. 


5. Future markets in the United States and foreign countries. 

o Future developments in the U.S. and foreign machine tool 

industries will focus on flexible manufacturing systems and 

computer-aided design and manufacturins . 

In both the United States and foreign countries, the technological 
areas of increasing importance in the machine tool industry will be FMS 
and CAD/CAM. When FMS is combined with CAD/CAM, an engineer will be 
able to design parts and initiate production of that particular part 
almost immediately. The industries which consume machine tools, 
particularly the automobile and aerospace industries, have recently 
increased their purchase of numerically controlled machine tools as 
opposed to conventional types. Total numerically controlled machine 
tools in use in the United States increased from about 1 percent of all 
machine tools in use in 1976 to 2.2 percent in 1982, with consumption 
of NC machine tools equal to approximately 36 percent of total machine 
tool consumption in the United States in 1982. Currently, the United 










XVI 1 


States lags behind both Japan and Europe in the installation and 
application of FMS units; the United States does maintain the lead in 
CAD, but lags in the application of CAM. Other areas with important 
future applications to machine tools will be lasers, microelectronics, 
and computer data-base techniques for controlling manufacturing systems. 













































DESCRIPTION AND USES 


Machine tools are responsible, directly or indirectly, for almost every 
manufactured product. They either produce the machines which produce the 
products or they produce the products directly. Machine tools are the only 
machines capable of producing other machines, including other machine tools. 
Thus, machine tools are responsible for almost any rise in productivity and 
are the standard by which a nation's industrial development and wealth are 
measured. Metalworking machine tools constitute the bulk of production and 
consumption of machine tools in the United States, as opposed to woodworking 
and other types of machine tools. 

Metalworking machine tools are machines used for shaping or surface- 
working metals, including metallic carbides, "whether by cutting away or 
otherwise removing the material or by changing its shape or form without 
removing any of it." The term does not include rolling mills and 
hand-directed or hand-controlled tools. 1/ Metalworking machine tools are 
generally classified as one of two types—metal-removing or metal-cutting, and 
metal-forming. 2/ Metal-removing machine tools are those that "shape or 
surface-work metal by removing metal either in the form of chips, dust, swarf, 
or similar forms or by spark-erosion, ultrasonic, electrolytic, or other 
chipless methods." Metal-forming machine tools are "metal-working machine 
tools other than metal-removing (metal-cutting) machine tools." 3/ 

Machine tools are power-driven devices designed to cut or form metal 
(workpieces) to a specified size and shape within allowable tolerances and 
finishes. The cutting or forming of a metal part is accomplished by the 
precisely controlled relative movement between the workpiece and a tool. The 
workpiece and the tool are generally both mounted on and rigidly supported by 
the machine tool, although in large applications, the workpiece may be mounted 
externally to the machine, requiring precise movement of the machine. 

Five basic types of relative motion are provided by machine tools. The 
five types of relative motion are accomplished when: (1) a workpiece is 
rotated and the cutting tool is simultaneously fed into the workpiece and 
traversed along its length (this is the basic cut performed on a lathe); (2) 
there is reciprocation 4/ between a workpiece and the tool (on a planing 
machine, the workpiece reciprocates and the tool is fed and traversed, and on 
a shaping machine, the workpiece is traversed and the tool is fed and 
reciprocated); (3) the workpiece is held stationary while the cutting tool is 
rotated and fed (as in drilling); (4) the workpiece is traversed and fed while 


1/ As defined in the Tariff Schedules of the United States Annotated 
(app. C). 

2/ App. D illustrates the types of machine tools in each of the two major 
groups. 

3/ As defined in the Tariff Schedules of the United States Annotated (app. 
C) . 

4/ Reciprocation refers to the alternate back and forth motion of the 
workpiece or tool; feeding is the term applied to motion that tends to deepen 
the cut; traversing is the type of motion that exposes new areas of the 
workpiece to the tool, broadening the cut. 





2 


the cutting tool rotates (milling and grinding operations); and (5) the 
workpiece is positioned between opposing tools which move together to strike, 
squeeze, or shear the workpiece (as in punching, bending, stamping, forging, 
and similar operations). 

Metal-removing machine tools include machines for boring, drilling, gear 
cutting and finishing, grinding (special-purpose, surface, and tool and cutter 
grinding), polishing, lapping, honing, milling, planing, shaping, slotting, 
broaching, sawing, filing, turning, threading, and for multiple functions 
(machining centers). Metal-forming machine tools include machines for 
punching, pressing, shearing, bending, forging, forming, and other special 
tasks. In addition to the above-named machine tools, special-purpose and one- 
of-a-kind machine tools are produced to meet the special needs of individual 
customers. 

Hundreds of different operations can be performed by machine tools; 
however, areas of application can overlap, and most operations can be 
performed by at least three types of machine tools. Under a given set of 
circumstances though, only one machine tool will do the best job. Therefore, 
an engineer must have a good working knowledge of the various metals to be cut 
or formed and the various capabilities of the machine tools available. The 
basic operation of the machine tools, the type of material being cut or 
formed, the size, shape, tolerance, and finish of the workpiece, and the types 
of cutting tools available are all factors which must be considered in the 
selection of the proper machine tool for a specific job. 

Machine tools have changed little over the years with respect to their 
basic functions of metal cutting and metal forming. What has changed and what 
has caused most of the variations in machine tool design and construction are 
the methods by which the machine tool motions that enable it to cut and form 
metal are controlled. Early machine tools were entirely manually controlled. 
However, as component parts of machinery and equipment became more 
sophisticated, there developed a need for likewise sophisticated methods of 
production. Numerical control (NC) evolved from an electronic control system 
that was developed through a program funded by the U.S. Air Force in the late 
1940’s and early 1950’s, and the first commercial NC machine tools appeared on 
the market in the mid-1950's. However, it took nearly 20 years for NC machine 
tools to gain acceptance. As late as 1976, only 1 percent of all types of 
machine tools in use in the United States were NC. 1/ This is not to say that 
NC lends itself to all production processes, but NC is the first step toward 
computer-aided manufacturing (CAM). The major factors inhibiting the adoption 
of NC in its early stages by machine tool purchasers were its price and the 
size of the control unit. The development of integrated circuits resulted not 
only in a substantial reduction in the size and price of NC units, but also in 
simpler operation and reduced programming complexity, faster, more flexible 
machine tool control, and the ability to interface computers with the control 
unit. Notwithstanding these developments, however, interest in NC machine 
tools has not increased significantly—in 1982, in the United States, only 
about 2.2 percent of all machine tools in use were NC. 2/ However, the 


1/ ’’The Machines Behind The Machines,” Iron Age . Aug. 30, 1976, p. 291. 

2/ Based on ”12th Inventory of Metalworking Equipment, 1976-1978,” American 
Machinist, and industry shipment data for 1979-82, National Machine Tool 
Builders' Association. 






3 


Department of Commerce reports that about 3.5 percent of the quantity of U.S. 
shipments of machine tools in 1982 were NC. 1/ In, addition, testimony was 
presented at the U.S. International Trade Commission hearing 2/ that indicated 
U.S. consumption of NC machine tools in 1982 was 36 percent of the value of 
total machine tool consumption that year. Although NC machine tools have 
accounted for a relatively small portion of machine tool consumption in the 
past, they are the leading edge of technology and are expected to account for 
a significant portion of industry output and consumption in the future. 

The most important function of numerical control is the accurate 
positioning of the tool in relation to the workpiece by means of signals or 
commands from a preprogrammed source. The command input to the control unit 
is typically in the form of numerical coding on punched paper tape. It can 
also be in the form of magnetic tape or punched cards, although these methods 
are not commonly used. The punched paper tape is scanned by a reader which 
sends signals to a control unit which, in turn, sends instructions to the 
stepping motors and drive units for each machine axis that is being 
controlled. Machine tools have been designed with up to eight axes 
numerically controlled. In addition to controlling the axes of motion, NC 
functions include selecting the proper tool from a magazine and controlling 
the speed and direction of spindle rotation. Numerical control was 
instrumental in the development of the machining center, since it was 
impossible to control more than two axes of motion simultaneously before the 
advent of NC. Numerical control programming can be either point-to-point or 
continuous path. Point-to-point programming locates the spindle or workpiece 
in one specific relative position after another, without the tool contacting 
the workpiece while moving from position to position. Continuous path 
programming provides the means for contouring operations since the tool is in 
contact with the workpiece as the tool or workpiece or both are moved about 
their axes of motion. 

Other types of control for machine tools are programmable control (PC), 
direct numerical control (DNC), and computer numerical control (CNC). 
Programmable control allows the machine tool operator to interrupt the program 
at any time and interject another operation or machining sequence. Direct 
numerical control is a method by which a common computer directly controls one 
or more numerically controlled machine tools. This computer can also be used 
to provide information on machine utilization and for production reports. 
Computer numerical control systems utilize microcomputers to store machining 
programs in read-only memories. The computer is used to augment or replace a 
numerical control unit. The advantages of CNC are its adaptability to 
different types of machine tools, ease of programming and information 
retrieval, and the ability of one computer to simultaneously control two or 
more machine tools. 

Some basic machining operations which require only one or a few parts are 
still most cost effective when performed by a skilled machinist on a manually 
controlled machine tool. However, complex machining and accurate reproduction 
of a number of similar parts are best accomplished by numerically controlled 
machine tools. 


1/ U.S. Department of Commerce, Current Industrial Reports, Metalworking 
Machinery , 1982. 

2/ Hearing held before the U.S. International Trade Commission, June 28 and 
297 1983. 





A 


THE WORLD INDUSTRY AND WORLD MARKET 
World Production 

During 1977-80, there was significant growth in world production of 
machine tools; the United States and West Germany shared the two top positions 
as world producers of metalworking machine tools (fig. 1). West Germany’s 
machine tool production climbed from $2.64 billion in 1977 to $4.71 billion in 
1980, before declining sharply to $3.95 billion in 1981 and $3.5 billion in 
1982. U.S. production followed a similar trend; however, unlike that of West 
Germany, U.S. production growth was sustained through 1981, and in that year 
reached $5.11 billion, up from $2.44 billion in 1977, before plummetting to 
$3.62 billion in 1982. 

During 1977-81, production by Japan increased greatly, from $1.60 
billion, making it the world’s fourth largest producer in 1977, to $4.8 
billion in 1981, surpassing West Germany and putting it in second place behind 
the United States as the leading producer of machine tools. Japan's 1982 
production, valued at $3.89 billion, surpassed that of the United States. 
Although Japan’s production also fell in 1982, it did not fall to the extent 
experienced by United States and West German producers. During 1977-81, the 
value of U.S. production increased 109 percent, and that of Japan increased 
200 percent. Production of machine tools by the Soviet Union, the world's 
fourth largest producer during 1977-82, fluctuated between $2.2 billion and 
$3.1 billion. 

Other important producing countries displaying impressive production 
gains during 1977-80 were Italy and the United Kingdom, with growth rates of 
97 and 137 percent, respectively. The current world slump in machine tool 
production began in 1981 for most countries except the United States and 
Japan, which, as mentioned earlier, sustained production growth through 1981. 

Total world production increased significantly during 1977-80, from 
$15.1 billion in 1977 to $26.7 billion in 1980, or by 77 percent, as shown in 
the following tabulation: 


Production 

Year (billion dollars) 


1977 - is.! 

1978 - 19.1 

1979 - 22.9 

1980 - 26.7 

1981 - 26.4 

1982 - 22.7 


Reflecting the beginning of the current world slump in machine tool demand, 
world production dropped slightly to $26.4 billion in 1981, and then fell more 
sharply to $22.7 billion in 1982, or by 14 percent. 1/ 


1/ If adjusted for inflation, the decline in world production in 1981 and 

1982 would be much more precipitous. 












5 


Figure 1.—Metalworking machine tools: Production, by 
specified countries, 1977-82. 


Million 

dollars 




Source: Data compiled from various issues of the American Machinist . 














6 


In 1977, the four leading machine-tool-producing countries—West Germany, 
the United States, the Soviet Union, and Japan—together accounted for 58.7 
percent of total world production (table 1). By 1982, these four countries 
had increased their share of world production to 61.3 percent, and the 
relative position among these countries had changed considerably. Japan's 
share of the world market increased 6.5 percentage points during 1977-82; 
conversely, West Germany’s world share fell 2 percentage points. U.S. 
production of machine tools accounted for 16.1 percent of total world 
production in 1977 and the U.S. share of total world production reached 19.3 
percent in 1981, before dropping to 15.9 percent in the following year. 

Japan's share of world production jumped sharply in 1981 to 18.2 percent, 
almost 4 percentage points higher than its share in 1980. 


Table 1 . Metalworking machine tools: Percentage distribution of world 
production, by major producing countries, 1977-82 


Country 

1977 

1978 

1979 

1980 

1981 

1982 

Japan- 

10.6 

12.3 

12.6 

14.3 

18.2 

17.1 

United States- 

16.1 

15.8 

17.7 

18.0 

19.3 

15.9 

West Germany- 

17.4 

17.8 

17.5 

17.6 

15.0 

15.4 


14.6 

13.9 

12.7 

11.5 

11.1 

12.9 

Italy- 

5.8 

5.6 

5.9 

6.5 

5.7 

5.5 

East Germany- 

4.2 

3.7 

3.5 

3.3 

3.1 

3.6 

Switzerland- 

3.8 

4.0 

4.1 

3.7 

3.2 

3.4 

United Kingdom- 

3.9 

4.3 

4.4 

5.2 

3.5 

3.2 

France- 

3.9 

3.8 

3.8 

3.6 

3.1 

2.7 

Romania- 

.8 

1.5 

2.0 

2.2 

2.4 

2.7 

Peoples Republic of 







China- 

2.4 

2.1 

1.8 

1.6 

1.7 

2.1 

Czechoslovakia- 

1.7 

1.9 

1.6 

1.2 

1.4 

1.9 

All other- 

14.8 

13.3 

12.4 

11.3 

12.3 

13.6 

Total- 

100.0 

100.0 

100.0 

100.0 

100.0 

100.0 


Source: Data compiled from various issues of the American Machinist 




































7 


Most other machine-tool-producing countries of note decreased their share 
of world production during 1977-82. Such countries include Italy, East 
Germany, Switzerland, the United Kingdom, and France, which collectively saw 
their share of world production fall from 21.6 percent in 1977 to 18.A percent 
in 1982. Of the lesser world machine tool producers, only Romania 
significantly increased its share of world production. Romania's share 
increased steadily from 0.8 percent of world production to 2.7 percent in 
1982, or by more than 230 percent. 

One measure of the importance of machine tool production to national 
economies is the ratio of the value of machine tool production to the total 
gross national product (GNP). This ratio varies significantly among the major 
non-Communist machine-tool-producing countries (fig. 2). For example, the 
value of machine tool production in Switzerland reached 0.09A percent of that 
country's total GNP during 1977-82, the highest such ratio of the major 
producing countries. Conversely, machine tool production in the United States 
accounted for 0.012 percent of U.S. GNP in 1982. Machine tool production in 
West Germany fluctuated between 0.051 and 0.058 percent of GNP during 1977-82, 
representing the second highest among major machine tool producers. The value 
of Japan's machine tool production to its total GNP reached almost 0.0A2 
percent in 1981 from 0.023 percent in 1977, representing the largest such 
growth of all major machine-tool-producing countries. 


World Imports 

Although annual imports of machine tools by most major importing 
countries fluctuated considerably, U.S. import growth during 1977-81 was the 
most striking (table 2). U.S. imports grew from $401 million in 1977 to $1.44 
billion in 1981, or by 259 percent. U.S. imports fell somewhat in 1982 to 
$1.3 billion. The Soviet Union’s imports ranged between $803 million (1978) 
to $988 million (1980). West Germany’s imports of machine tools grew 143 
percent during 1977-80, from $320 million in 1977 to $802 million in 1980, 
before declining to $514 million in 1982. With few exceptions, most major 
importing countries saw their imports increase from 1977 through 1980 or 1981 
and decline thereafter, reflecting the general downturn in the worldwide 
industrial cycle. 

Table 2.—Metalworking machine tools: imports, by speci.iec countries, 

1977-82 


(In millions of dollars) 


Country 

1977 

1978 

1979 

1980 

1981 

1982 

United States- 

400.9 

715.3 

1,043.3 

1,298.5 

1,437.0 

1,300.0 

U.S.S.R- 

900.0 

803.0 

881.0 

987.8 

951.9 

960.0 

Vest Germanv- 

320.4 

462.0 

620.9 

302.1 

616.4 

514.5 

France- 

286.2 

289.6 

371.4 

554.0 

566.6 

484.2 

United Kingdom- 

238.3 

399.2 

600.4 

623.4 

432.0 

385.2 

3uigaria- 

35.0 

25.0 

23.0 

24.0 

267.3 

273.0 

Austria- 

86.3 

98.9 

135.6 

165.6 

290.2 

271.9 

Canada- 

190.9 

228.0 

260.5 

433.0 

557.4 

260.6 

Renublic of Korea- 

130.0 

156.0 

397.6 

344.3 

324.5 

250.0 

T 

37 8 

119.9 

164.3 

229.3 

215.8 

228.4 

jEDSIi ——— 

187.7 

194.4 

255.9 

379.7 

300.0 

221.4 

Rep. of South Africa— 

46.0 

80.5 

140.5 

205.7 

250.0 

212.0 

Mexico- 

80.0 

75.0 

35.0 

310.0 

450.0 

200.0 

Romania- 

150.0 

339.0 

374.1 

316.9 

311.5 

197.5 

East Germany- 

173.9 

217.3 

243.8 

257.5 

214.6 

197.0 


Source: Data compiled from various issues of the American Manningst . 



















8 


Figure 2.—Metalworking machine tools: The value of production of metal¬ 
working machine tools as a share of GNP, by specified countries, 1977-82 

Percent 



JV 1982 data for France are not available. —— - 

Source: Derived from gross national product data published by the Inter¬ 

national Monetary Fund and from data submitted by interested parties to the 

U. S. Tntprnpf I nnp 1 TVarlo r omm -i opt ^t-> in ^ T ~ ^ +--■ „ „ _ 























9 


World Exports 

West Germany and Japan consistently ranked as the major exporting 
countries during 1977-82 (fig. 3). During this period, West Germany’s exports 
climbed to almost $3.0 billion in 1980 from $1.8 billion in 1977, or by 67 
percent. West Germany's exports then declined in each of the next 2 years, 
falling to $2.3 billion in 1982. Japan's exports increased steadily during 
1977-81, to $1.7 billion in 1981 from $616 million in 1977, or by 176 percent. 
Japan's exports fell to $1.3 billion in 1982. 

In 1982, the United States ranked sixth as an exporting country, with 
exports valued at $640 million. U.S. exports in 1982 represented a decline of 
34 percent from the $972 million in exports recorded in 1981—the peak export 
year for the United States. During 1977-81, U.S. exports grew by 115 percent 
from $452 million in 1977. Other major exporting countries in 1982 were Italy, 
($749 million in exports), Switzerland ($680 million), East Germany ($642 
million), and the United Kingdom ($490 million). The peak years for exports 
during 1977-82 for all major exporting countries were, depending on the 
country, either 1980 or 1981. 

The level of exports as a share of total production for individual 
countries varied considerably. West Germany, for example, exported almost 66 
percent of its total production in 1982, and it consistantly exported from 63 
to 69 percent of total domestic production during 1977-82 (see fig. 4 for a 
comparison of 1977 and 1982 export-to-production ratios). Conversely, during 
1977-82, the United States exported between 16 and 19 percent of domestic 
production, making its export-to-production ratio the second lowest of major 
machine-tool-exporting countries. Japan’s export-to-production ratio ranged 
from 33 to 43 percent during the same period, and its export share of domestic 
production has declined since 1979. 

The export market is much more important to most other countries in terms 
of total domestic machine tool production than it is for the United States. 
Switzerland, for example, exported as much as 89 percent of its production 
during 1977-82. East Germany's exports in 1977 reached 93 percent of 
production, the United Kingdom exported as much as 67 percent of domestic 
production, and Italy exported as much as 60 percent of its production during 
1977-82. 

Of the major exporting countries, only Japan, Italy, and the United 
Kingdom increased their shares of total world exports in 1982 compared with 
those of 1977. Japan’s share of total world exports increased from 9.5 
percent in 1977 to 13.4 percent in 1982 (fig. 5), that of Italy increased to 
7.9 from 6.7 percent, and that of the United Kingdom increased slightly to 5.1 
percent (1982) from 4.6 percent (1977). 

During 1977-82, Japan maintained its position as the world's second 
largest machine-tool-exporting country, trailing only West Germany. West 
Germany's exports as a share of total world exports declined almost 4 
percentage points, from 28.0 percent in 1977 to 24.2 percent in 1982. This 
decline coupled with Japan's increase narrowed the gap between the two 
countries to 10.8 percentage points in 1982, compared with a gap of 18.5 
percentage points in 1977. 



10 


Figure 3.—Metalworking machine tools: Exports, by specified countries, 

1978-82. 

Million 

dollars 



Source: 


Data compiled from vaious issues of the American Machinist. 













Figure 4.—Metalworking machine tools: Exports as a share of domestic 
production, by specified sources, 1977 and 1982. 


Percent 



A 

West Germany 

E 

East Germany 

B 

Japan 

F- 

United States 

£ 

Italy 

- G 

United Kingdom 

D 

Switzerland 

H 

_J France 


Source: Data compiled from various issues of the American Machinist . 






















































































Figure 5.—Metalworking machine tools: Exports as a share of total 
world exports, by specified sources, 1977 and 1982. 


Percent 



1 A I West Germany 
I B [ Japan 
I C I Italy 
1 D . — Switzerland 


I E ( East Germany 


c 


c 


TT 

ll 


] United States 
United Kingdom 
] France 


Source: Data compiled from various issues of the American Machinist. 






















































13 


The U.S. share of world exports declined to 6.7 percent in 1982 from 7.0 
percent in 1977. The fall in U.S. exports in 1982 is much more pronounced 
when considering that it represents a declining share of a declining world 
export market. Other countries losing world export shares include East 
Germany, Switzerland, and France. 


World Consumption 

Apparent world consumption of machine tools by the 10 largest consuming 
countries increased dramatically to $19.1 billion in 1981, or by 93 percent, 
from the $9.9 billion consumed in 1977 (fig. 6). Consumption in these 10 
countries dropped to $16.3 billion in 1982. With the exception of 1977, the 
United States was the largest consumer of machine tools during 1977-82. U.S. 
consumption peaked in 1981 at almost $5.6 billion, representing a gain of 133 
percent over that in 1977, and then fell to $4.4 billion in 1982. Japan's 
consumption growth was the most significant of the 10 largest consuming 
countries. During 1977-81, Japan increased its consumption of machine tools 
more than 200 percent, from $1.1 billion in 1977, to $3.3 billion in 1981. 
Consumption of the second largest machine-tool-consuming country, the Soviet 
Union, fluctuated between $2.8 billion (1977) and $3.8 billion (1980). In 
1982, the four largest machine-tool-consuming countries, the United States, 
the Soviet Union, Japan, and West Germany, together accounted for $8.2 billion 
in consumption, or 50 percent of the total consumed by the 10 major countries. 

The share of domestic consumption accounted for by imports (commonly 
referred to as import penetration) varies widely among major machine-tool-con¬ 
suming nations. For most years during 1977-82, imports accounted for more than 
half of domestic machine tool consumption in the Republic of Korea, France, and 
the United Kingdom (fig. 7). Among major machine-tool-consuming countries, 
the United States, the United Kingdom, and France experienced the greatest 
growth in import penetration during 1977-82. In the United States, imports as 
a share of consumption increased to just under 30 percent in 1982 from almost 
17 percent in 1977—a gain of nearly 13 percentage points. Import penetration 
in both France and the United Kingdom was 61 percent in 1982, representing 
increases of 14 and 15 percentage points, respectively, over 1977 penetration 
ratios. Italy's and West Germany's import penetration ratio fluctuated 
slightly during 1977-82 between 28 and 32 percent. Imports of machine tools 
accounted for only 8 percent of Japan’s domestic consumption in 1982—the 
lowest such ratio of the major machine-tool-consuming countries. During 
1977-82, Japan's ratio of imports to consumption peaked in 1980 at just over 9 
percent. 

Romania’s import penetration ratio declined dramatically to 30 percent in 
1982 from just over 65 percent in 1977, representing a decline of more than 35 
percentage points. The drop in Romania’s import penetration is a measure 
of the successful development of the Romanian machine tool industry. 


Productivity of World Machine Tool Producers 

Machine tool productivity among major machine-tool-producing countries 
increased significantly during 1977 through 1980 (or 1981, depending on the 




Figure 6.—Metalworking machine tools: Consumption, by 
specified countries, 1977-82. 


Million 

dollars 



Source: Data compiled from various issues of the American Machinist. 














Figure 7.—Metalworking machine tools: Imports as a share of apparent 
domestic consumption, by specified countries, 1977-82. 


Percent 



Source: Data compiled from various issues of the American Machinis t. 















16 


particular country), as shown in table 3. Japan’s productivity gains during 
1977-82 were the most pronounced among major producing countries, growing to 
$114,000 worth of production per employee in 1981 from $36,000 per employee in 
1977. 1/ In 1981-82, Japan’s productivity was more than twice that of its 
closest competitors. The principal reason for Japan's productivity gains was 
that Japan's machine tool producers concentrated on production of standard- 
type machining centers and lathes, and production of such machines was 
conducive to assembly line production. Other countries, the United States 
included, tended to concentrate on specialty machine tools requiring small 
batch production. The productivity of U.S. producers steadily increased from 
$29,000 per employee in 1977 to $53,000 per employee in 1981, before declining 
to $41,000 per employee in 1982. Productivity in the seven major 
non-Communist machine tool producing countries dropped in 1982, reflecting the 
decrease in worldwide demand for machine tools. During 1981-82, the 
productivity of U.S. producers dropped by $12,000 per employee and that of 
Japan dropped by $22,000 per employee to $92,000. 


Table 3 .—Metalworking machine tools: Value of production per employee 
(productivity) for the major, non-Communist producing countries, 
1977-82 


(In thousands of dollars) 


Country ; 1977 ; 1978 ; 1979 * # 1980 ; 1981 ; 1982 


Japan 1 / -: 36 : 62 : 71 : 89 : 114 : 92 

Switzerland-: 2/ j 44 : 55 : 59 : 51 : 48 

United States-: 29 : 34 : 42 : 48 : 53 : 41 

Italy-: 31 : 29 : 37 : 46 : 42 : 37 

West Germany-: 27 : 34 : 40 : 48 : 40 : 37 

France-: 28 : 35 : 44 : 49 : 43 : 35 

United Kingdom-: 12 : 16 : 20 : 31 : 22 : 19 


_1/ Productivity data for Japan are based on production of metal-cutting 
machine tools only; productivity data for all machine tool production are not 
believed to differ significantly from the data shown. 

2/ Not available. 

Source: Compiled from data provided by the National Machine Tool Builders 

Association, American Machinist , and various submissions to the staff of the 
U.S. International Trade Commission by interested parties. 


1/ Unadjusted for inflation. 




















17 


EFFECT OF EXCHANGE RATES ON THE MACHINE TOOL INDUSTRY 

From 1977 to 1982, the value of machine tools imported by the United 
States increased from $401 million to $1.3 billion, or by 224 percent. Part 
of the sharp increase may be due to the increase in competitiveness that the 
products of most countries have enjoyed since 1977 due, in large part, to 
changes in the exchange rates as reflected in the price of inputs available to 
foreign producers in their domestic market. Exchange-rate changes between the 
U.S. dollar and major foreign currencies are discussed in appendix E. 

The price advantage that foreign products enjoy in the United States 
applies only to those products that are produced using inputs that are priced 
in foreign currency. If the price of all inputs are denominated in U.S. 
dollars, then no competitive advantage accrues to the foreign producer. 1/ 

Most of the inputs used in the production of machine tools are purchased 
from domestic sources: approximately 60 percent of the inputs in the machine 
tool industry are labor, and much of the remaining 40 percent consists of 
steel that is purchased domestically. Therefore, the evidence suggests that 
most foreign producers of machine tools have enjoyed an increase in 
competitiveness in the United States since 1977 because of the differences in 
relative inflation rates and changes in exchange rates. 


1/ Wage rates and the cost of labor are nearly always denominated in the 

local currency, whereas the price of raw materials is often denominated in 
dollars. 



18 


THE U.S. INDUSTRY AND MAJOR FOREIGN COMPETITORS 

Industry Profiles 

United States 

The U.S. metalworking machine tool industry has declined both in number 
of firms and in employment since 1977. However, industry shipments, imports, 
and exports increased from 1977 to 1981 and then decreased in 1982. The 
industry has attempted to help itself and has utilized various Government 
programs, including trade adjustment assistance and various petitions under 
public laws. The U.S. Government funds generic research and development 
programs of benefit to the machine tool industry, and particular agencies fund 
programs of specific benefit to the machine tool industry. 


Industry 

In 1982, there were approximately 1,140 establishments producing metal¬ 
working machine tools in the United States, representing a 15-percent drop 
from the 1,343 establishments reported in the 1977 Census of Manufactures . 1/ 

In addition to the primary producers, there are a small, but unknown, number 
of establishments, in other industries that manufacture machine tools and 
parts as secondary products. Since 1977, there have been significant changes 
involving the number of machine tool establishments. Because the number of new 
openings is relatively insignificant, compared to the total number of 
establishments mergers, acquisitions, consolidations, and closings have 
accounted for a decrease in the number of establishments. A total of about 
200 establishments have been affected by mergers, acquisitions, 
consolidations, or closings since 1977. During 1977-82, there were 64 
mergers, acquisitions, and purchases of assets in the metalworking machine 
tool industry. These mergers principally involved larger companies acquiring 
smaller companies. The number of corporate changes showed an increasing trend 
through 1980, but declined in both 1981 and 1982. The following tabulation 
shows merger, acquisitions, and asset purchases 2/ data obtained from the 


1/ U.S. Department of Commerce and Commission staff interviews with industry 
executives. It should be noted that the Bureau of the Census and the National 
Machine Tool Builders’ Association estimate that only 60 percent of the 
reporting establishments produce primarily completed machine tools, whereas 
the remaining 40 percent produce primarily only machine tool accessories, 
dies, tools, jigs, and fixtures. This implies that the number of 
establishments engaged primarily in manufacturing machine tools dropped from 
about 800 in 1977 to approximately 600 in 1982. 

2/ Includes machine tool builders taking over firms which manufacture 
products other than machine tools, but related to machine tool production, 
such as electronic controls or machinery. Includes takeovers of machine tool 
builders by corporations not in the industry. 






19 


Federal Trade Commission and various editions of the Yearbook on Corporate 
Mergers, Joint Ventures, and Corporate Policy , and other literature: 


Year 


Number of mergers, acquisitions , 

and purchases of assets 


1977 - 8 

1978 - 7 

1979 - 10 

1980 - 18 

1981 - 10 

1982 - 11 

1983 (January-May)- 4 


Seven mergers involved foreign firms taking over U.S.-owned firms, and 
five involved a U.S.-owned firm acquiring a foreign firm. 

In 1978, the Justice Department opposed the merger of the Cross Co. and 
Kearney and Trecker; however, this merger was completed in 1979. Other major 
acquisitions included Bendix acquiring Warner and Swasey, Ogden Corp. 
acquiring Danly Machine Corp., and AMCA International, Inc., (Canada) 
acquiring Giddings and Lewis. There is a consensus among manufacturers and 
purchasers of metalworking machine tools and industry analysts that mergers, 
acquisitions, and closings will accelerate in the 1980’s. 1/ In response to 
the Commission's survey, 18 U.S. firms reported they are 25 percent or more 
beneficially owned by foreign entities. In addition, 24 U.S. producers 
reported that foreign companies have direct investments in their firms, or 
participate in joint ventures or licensing arrangements to produce 
metalworking machine tools. A total of 50 U.S. producers have direct 
investments abroad in foreign affiliates or subsidiaries, or participate in 
joint ventures or licensing agreements, according to survey responses. 

The average U.S. metalworking machine tool establishment employs 77 
persons, of which 48 are production workers. The majority of U.S. 
establishments employ fewer than 20 persons and less than 1 percent of the 
establishments employ 1,000 or more workers. 

Employment in the U.S. metalworking machine tool industry fluctuates with 
the cyclical demand for its products. In 1977, when shipments totaled $2.4 
billion, there were approximately 84,000 employees in the industry, 53,000 of 
whom were production workers. This figure rose dramatically in the ensuing 
years to a peak of about 100,000 in 1980, when U.S. shipments totaled 
approximately $4.8 billion. Employment in 1982 dropped to 88,000 (55,000 
production workers) as shipments fell to pre-1979 levels. 2/ At present, 
employment totals approximately 69,000. 3/ The average employment reported by 


1/ Commission staff interviews with manufacturers and purchasers in Ohio, 
Illinois, and Michigan, and "Foreign Competition Stirs U.S. Toolmakers," 
Business Week , Sept. 1, 1980, pp. 68-70. 

2/ Employment figures from U.S. Department of Commerce reports U.S. 
Industrial Outlook 1982 and U.S. Industrial Outlook 1983 . 

3/ Commission staff interviews with machine tool manufacturers revealed that 
total employment in the metalworking machine tool industry has been reduced by 
as much as 25 percent since December 1982. 



















20 


questionnaire respondents followed a similar pattern, increasing from 36,950 
in 1977 to 46,169 in 1980, before declining to 34,541 in 1982. Most of the 
increase and decrease in employment was reported in the metal-removing machine 
tool sector, however, employment in the metal-forming sector also changed, as 
shown in table 4. As the employment level drops, a certain number of highly 
skilled workers must be terminated. Generally, older, skilled machinists with 
tenure are retained, and younger employees are laid off. These younger people 
tend to migrate to other jobs and are not available when an upswing in the 
industry occurs. Others new to the industry are then recruited and put 
through a training period of 4 or 5 years. Since demand cycles are usually 
shorter than training periods, some newly trained machinists are laid off 
shortly before or shortly after their training period is completed. The 
results are a skilled manpower shortage in the machine tool industry and 
difficulty in recruiting qualified people. However, as technology advances 
are applied to the manufacturing process, fewer skilled machinists will be 
required to efficiently run the production equipment. For example, advances 
in numerical control have made it possible for one skilled machinist to run 
two or more machine tools, where before, one machinist was required for each 
machine tool. The application of new technology in the manufacturing process 
will continue to affect employment levels in the industry. Workers will still 
be required for the assembly and testing of machine tools; however, they are 
most affected by the cyclicality of the industry. 


Table 4.—Average number of employees in U.S. establishments producing metal¬ 
working machine tools, by major types, 1977-82 


Item * 1977 * 1978 * 1979 ' 1980 * 1981 ' 1982 


Metal-removing machine :::::: 

tools-: 31,087 ; 34,310 : 37,087 : 39,467 ; 38,778 : 30,378 

Metal-forming machine :::::: 

tools-: 5,863 : 6,392 : 6,868 ; 6,702 : 6,073 : 4,163 

All metalworking machine :::::: 

tools-: 36,950 : 40,702 : 43,955 : 46,169 : 44,851 : 34,541 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 















21 


Wages paid to machine tool industry production workers have increased 
from approximately $6.33 per hour in January 1977 to about $10.00 per hour in 
October 1982, the last month for which data are available. 1/ Production 
workers' wages in the machine tool industry have generally been above those of 
production workers in durable-goods industries, although motor-vehicle, 
transportation equipment, and aircraft industry production workers have 
maintained a 10- to 30-percent edge over machine tool production workers since 
1977. 2/ Respondents to the Commission’s survey reported man-hours worked 
increased from 1977 to 1980 and decreased in 1981 and 1982. Wages paid were 
reported to increase from 1977 to 1981 and decrease in 1982, as illustrated in 
table 5. 


Table 5.—Man-hours worked by and wages paid to U.S. production and related 
workers producing metalworking machine tools, by major types, 1977-82 


Item 


1977 


1978 


1979 


1980 


1981 


1982 


Man-hours (1,000 hours) 


Metal-removing machine 

tools- 

Metal-forming machine 

tools- 

45,973 

8,839 

53,796 

9,962. 

59,370 

10,561 

63,168 

9,792 

58,537 

9,360 

39,588 

5,555 

Total- 

54,812 

63.758 

69,931 

72,960 

68,329 

45,143 


Wages (1,000 dollars) 

Metal-removing machine 







tools- 

346,376 

420,077 

438,538 

567,750 

589,882 

426,042 

Metal-forming machine 







tools- 

68,708 

83,094 

95,101 

98,393 

102,729 

70,250 

Total- 

415,084 

503,171 

533,639 

666,143 

692,611 

T9K29T 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


1/ U.S. Department of Labor, Bureau of Labor Statistics, ’’Employment and 

Earnings February 1978” and ’’Employment and Earnings December 1982.” 

2/ Ibid. 






























22 


The major users of machine tools, transportation equipment producers, are 
concentrated predominantly in the East North Central region, and the largest 
share of machine tool production is also in that area. The major producing 
States for metalworking machine tools are Ohio, Michigan, and Illinois, which 
together accounted for approximately 54 percent of production, according to 
the 1977 Census of Manufactures , the latest available source. 

U.S. shipments of metalworking machine tools, as reported by the 
Department of Commerce, increased from $2.5 billion in 1977 to $5.1 billion in 
1981, and decreased substantially to $3.7 billion in 1982. 1/ In response to 
the Commission’s questionnaire, U.S. producers reported that total shipments 
increased from $1.6 billion in 1977 to $3.4 billion in 1981, and decreased to 
$2.5 billion in 1982. As indicated in table 6, domestic shipments increased 
from $1.4 billion in 1977 to $3.0 billion in 1981, and decreased to $2.3 
billion in 1982. 


Table 6.—Metalworking machine tools: U.S. producers' domestic shipments, 

by major types, 1977-82 


Item 

• • • • • 

1977 ' 1978 ’ 1979 * 1980 ' 1981 * 1982 

• • • • • 

• • • • • 

Metal-removing 

machine tools- 

Metal-forming 

machine tools- 

Total- 

Metal-removing 

machine tools- 

Metal-forming 

machine tools- 

Total- 

Quantity (units) 

28,538 

5,037 

31,708 

5,657 

35,804 

6,035 

35,877 

4.955 

34,796 

3.464 

18,855 

2.302 

33.575 

37.365 

41,839 

40.832 

38,260 

21,157 

Value (1,000 dollars) 

1,216,905 

202,699 

1,604,255 

273,823 

2,007,257 

331,207 

2,447,553 

358,649 

2,699,357 

315,999 

2,067,749 

206,250 

1,419,604 

1,878,078 

2,338,464 

2,806,202 

3,015,356 

2,273,999 


Source: Compiled from data submitted in response to questionnaires of the U.S 

International Trade Commission. 


During 1977-80, U.S. manufacturers’ shipments of NC lathes and machining 
centers grew at an average annual rate of 32.5 and 21.1 percent, 
respectively. However, during 1980-82, manufacturers’ shipments decreased 
roughly at an average annual rate of 26.3 percent for NC lathes. In contrast, 
shipments of machining centers decreased by 2 percent in 1981 and by 39 
percent in 1982. Table 7 depicts U.S. Department of Commerce data and 14 
respondents' data submitted in response to Commission questionnaires for 
domestic shipments of NC lathes and machining centers for 1977-82. 


1/ Obtained from official statistics of the U.S. Department of Commerce. 

























23 


Table 7.—Metalworking machine tools: U.S. producers* domestic shipments 
of numerically controlled lathes and machining centers, 1977-82 


Year 

Numerically controlled lathes 

Machining centers 

Quantity 

Value 

Quantity 

Value 


Units 

Million 

dollars 

Units 

Million 

dollars 

Commerce data: 





1977 1/ 

1,178 

195.3 

1,201 

175.0 

1978 1/ 

1,464 

237.2 

1,486 

246.0 

1979 

2,362 

347.7 

1,953 

356.5 

1980 

2,739 

481.2 

2,132 

413.0 

1981 

2,021 

441.4 

2,081 

482.6 

1982 

1,489 

333.4 

1,264 

338.8 

Commission ques¬ 
tionnaire 
data: 





1977 

996 

165.8 

611 

74.5 

1978 

1,213 

203.3 

724 

98.7 

1979 

1,755 

274.5 

1,005 

154.5 

1980- 

2,183 

399.2 

1,193 

189.3 

1981 

1,792 

440.5 

1,229 

222.5 

1982 

1,317 

340.8 

756 

167.9 


1/ Data compiled from the National Machine Tool Builders' Association, 
Economic Handbook of the Machine Tool Industry . 1982 and 1983, pp. 100 and 101. 


Source: Compiled from official statistics of the U.S. Department of 

Commerce and from data submitted in response to questionnaires of the U.S. 
International Trade Commission, except as noted. 


Table 8 shows U.S. producers' export shipments of NC lathes and machining 
centers for 1977-82. 






























24 


Table 8.—Metalworking machine tools: U.S. producers’ exports of 
numerically controlled lathes and machining centers, 1977-82 


Year 

Numerically controlled lathes 

Machining centers 

Quantity 

Value 

Quantity 

Value 



Million 


Million 


Units 

dollars 

Units 

dollars 

1977 

44 

7.1 

30 

4.9 

1978 

135 

15.4 

43 

00 

• 

r~. 

1979 

184 

17.6 

73 

12.7 

1980- 

169 

23.0 

103 

16.8 

1981 

151 

23.8 

84 

10.1 

1982 

108 

18.3 

44 

6.2 


Source: Compiled from data submitted in response to questionnaires of the 


U.S. International Trade Commission. 


U.S. producers' domestic shipments and export shipments of NC lathes and 
machining center units peaked in 1980. However, the Commission’s survey of 
U.S. importers reveals that both U.S. importers’ shipments and imports peaked 
in 1981, in both quantity and value, declining only in 1982. Table 9 shows 
U.S. importers' shipments for 1977-82. U.S. imports for 1977-82 are shown in 
table 10. 


Table 9.—Metalworking machine tools: U.S. importers’ shipments of 
numerically controlled lathes and machining centers, 1977-82 


Year 

Numerically controlled lathes 

Machining centers 

Quantity 

Value 

Quantity 

Value 



Million 


Million 


Units 

dollars 

Units 

dollars 

1977 

434 

33.0 

65 

3.7 

1978- 

724 

65.5 

113 

11.1 

1979- 

1,122 

109.0 

270 

25.6 

1980 

1,566 

166.0 

568 

53.6 

1981 

1,740 

219.5 

767 

94.9 

1982- 

1,234 

142.4 

697 

89.1 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 












































25 


Table 10.—Metalworking machine tools: U.S. imports of numerically controlled 

lathes and machining centers, 1977-82 


Year 

Numerically controlled lathes 

Machining centers 

Quantity 

Value 

Quantity 

Value 



Million 


Million 


Units 

dollars 

Units 

dollars 

1977 

423 

25.1 

110 

6.7 

1978 

745 

55.5 

137 

11.3 

1979 

1,183 

96.6 

312 

25.6 

1980 

1,739 

143.5 

615 

48.4 

1981 

1,789 

172.2 

888 

89.5 

1982 

1,353 

119.1 

699 

72.3 


Imports of NC lathes and machining centers by U.S. importers follow the 
pattern of U.S. importers' shipments. Both imports and shipments of NC lathes 
and machining centers increased fairly rapidly during 1977-80. However, the 
growth rate of NC lathes units slowed between 1980 and 1981; the growth rate 
of machining center units was approximately the same for 1980 and 1981 as it 
was in 1977-80. However, in 1982, both U.S. importers’ shipments and imports 
declined. Shipments of NC lathes decreased by 29 percent, while imports 
decreased by 24 percent during 1981 and 1982. For the same period, machining 
center shipments decreased by only 9 percent, and imports decreased by about 
24 percent. Differences in shipment values are apparent, depending on the 
source used. Table 11 shows shipment data for 1977-82 from three sources. 

As shown in figure 8, U.S. shipments of metalworking machine tools 
(reported in millions of 1982 dollars) followed three distinct cycles during 
1962-82. Shipments peaked in the years 1967, 1975, and 1980 at $5.6 billion, 
$4.1 billion, and $5.4 billion, respectively (in 1982 dollars). The bottoms 
of the cycles occurred in 1971 and 1976, when shipment values were $2.8 
billion and $3.5 billion, respectively. At the end of 1982, U.S. shipments 
were valued at $3.7 billion, although industry sources predict 1983 shipments 
will be approximately 30 percent less than 1982 shipments. 1/ 

As reported by respondents to the Commission’s survey, capacity 
utilization increased from 69 percent in 1977 to 76 percent in 1979, and then 
decreased in each subsequent year even though shipments continued to rise 
through 1981. In 1980, capacity utilization was reported at 72 percent; in 
1981, 66 percent; and in 1982, 36 percent. Respondents also indicated that 
total capacity to produce metalworking machine tools increased 16 percent from 
1977 to 1981, and decreased by 1 percent in 1982. 


1/ U.S. Department of Commerce, U.S. Industrial Outlook 1983, and Commission 

staff interviews with machine tool industry executives. 

























26 


Table 11.—Metalworking machine tools: Comparison of U.S. producers* 

shipment data from the U.S. Department of Commerce, the National Machine 
Tool Builders* Association (NMTBA), and the U.S. International Trade 
Commission, 1977-82 


(In thousands of dollars) 


Year 

U.S. Department 
of Commerce 1/ 

NMTBA 2/ 

U.S. International 

Trade Commission 3/ 

Commission question¬ 
naire returns 

Adjusted 4/ 

1977 

2,453 

2,281 

1,572 

2,453 

1978 

3,142 

3,013 

2,120 

3,307 

1979 

4,064 

3,877 

2,584 

4,031 

1980 

4,812 

4,692 

3,209 

5,006 

1981 

5,111 

5,096 

3,443 

5,371 

1982- 

3,724 

3,604 

2,525 

3,939 


1/ Data compiled from official statistics of the U.S. Department of 
Commerce, Current Industrial Reports; includes data on complete new machine 
tools, including machines with a value of under $2,500, and excludes data for 
machine tools designed for home workshops and rebuit machines. 

2/ Estimated by the National Machine Tool Builders Association Statistical 
Department; includes data for complete machine tools and excludes data for 
machine tools costing under $2,500, machine tools designed for home workshops, 
rebuilt machines, and parts sold separately. 

3/ Estimated by the staff of the U.S. International Trade Commission. 

4/ Questionnaire respondents accounted for 64.1 percent of industry 
shipments in 1977, using Department of Commerce shipment data as a base. 
Applying this percentage to questionnaire responses for 1978-82 yielded the 
adjusted figures. 


Productivity in the U.S. industry, measured in terms of dollars of 
production per employee, increased 83 percent, from $29,000 in 1977 to $53,000 
in 1981, and decreased 23 percent to $41,000 in 1982. 1/ Productivity, as 
reported by respondents to the Commission's survey, 2/ increased 79 percent, 
from $43,000 in 1977 to $77,000 in 1981, and decreased 5 percent to $73,000 in 
1982. 


According to the Commission’s survey, imports of metalworking machine 
tools increased from $152 million in 1977 to $695 million in 1981, and 


1/ Based on U.S. Department of Commerce employment statistics and American 
Machinist production figures. 

2/ Measured in terms of net sales per employee. 



















Million .19 82 Figure 8. —Metalworking machine tools: U.S. shipments, 1962-82. 

dollars 


27 



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28 


decreased to $549 million in 1982, as shown in table 12. Import shipments 
increased from $182 million in 1977 to $837 million in 1981, before decreasing 
to $641 million in 1982, as table 13 illustrates. The U.S. Department of 
Commerce reported imports of $401 million in 1977, $1.5 billion in 1981, and 
$1.3 billion in 1982. The major U.S. suppliers of imported machine tools 
during 1977-82 were Japan, West Germany, and the United Kingdom. Commerce 
reported that in 1977, Japan accounted for $105 million, or 26 percent of 
total U.S. imports; West Germany accounted for $91 million, or 23 percent; and 
the United Kingdom accounted for $46 million, or 11 percent. By 1982, the 
value of Japanese imports had reached $535 million, or 42 percent of total 
U.S. imports. Imports from West Germany had increased to $204 million, but 
accounted for only 16 percent of total imports. Likewise, imports from the 
United Kingdom increased to $108 million, but its share of total imports 
dropped to 9 percent. 

Export shipments reported by producers in response to the Commission’s 
survey totaled $152 million in 1977, $242 million in 1978, $245 million in 
1979, $427 million in 1981, and to $245 million in 1982, as indicated by table 
14. Exports reported by the Department of Commerce totaled $452 million in 
1977, increased to $1.0 billion in 1981, and decreased to $623 million in 
1982. 1/ Thus, the trade balance favored the United States by $51 million in 
1977, and favored the U.S. trading partners by $500 million in 1981 and $677 
million in 1982. The major markets for U.S.-made machine tools during 1977-82 
were Mexico, Canada, and the United Kingdom. In 1977, Mexico imported 42 
million dollars' worth of machine tools from the United States, or 9 percent 
of total U.S. exports. U.S. exports to Canada totaled $61 million, or 13 
percent of the total, and exports to the United Kingdom amounted to $27 
million, or 6 percent of the total. By 1981, U.S. exports to Mexico had 
increased to $257 million, accounting for 25 percent of U.S. exports. Exports 
to Canada increased to $270 million in 1981, accounting for 26 percent of U.S. 
exports, and the United Kingdom accounted for $64 million, or 6 percent. In 
1982, U.S. exports of metalworking machine tools to these three countries and 
their shares of total U.S. exports were as follows: Mexico, $135 million (22 
percent); Canada, $80 million (13 percent); and the United Kingdom, $59 
million (9 percent). These three countries together accounted for $316 
million, or 77 percent, of the $412 million decrease in U.S. exports between 
1981 and 1982. U.S. exports of metalworking machine tools decreased 
significantly from 1981 to 1982, primarily because of the depressed automobile 
and energy industries in both Canada and Mexico. 

U.S. exports of metalworking machine tools to Japan were valued at 
$22 million in 1977, and increased to $59 million by 1980. Annual decreases 
occurred in 1981 ($54 million) and 1982 ($51 million). U.S. exports to Japan 
accounted for 5 percent of total exports in 1977, rose to 8 percent in 1980, 
decreased to 5 percent in 1981, and then increased to 8 percent in 1982. U.S. 
metalworking machine tools exported to Japan are typically high-precision 
machine tools for such specialized uses as gearmaking, grinding, and milling. 
Japanese machine tool makers have not yet been able to match the technology of 
these U.S. machines. 2/ Apparent U.S. consumption of metalworking machine 


1/ Obtained from official statistics of the U.S. Department of Commerce. 
2/ News Digest Publishing Co., Ltd., Japanese Machine Tool *81- , 82 Guide , 
pp. A16 and A17. 




29 


Table 12.—Metalworking machine tools: U.S. imports for consumption, by 

major types, 1977-82 


Item : 1977 : 1978 : 1979 : 1980 : 1981 : 1982 

• ••••• 

• ••••• 

Quantity (units) 


Metal-removing :::::: 

machine tools-: 12,770 : 18,629 : 25,015 : 32,758 : 43,489 ; 43,541 

Metal-forming :::::: 

machine tools-: ^4 : 674 . 1,425 : 2,269 ; 3,870 : 6,779 

Total-: 13,244~: 19,303 : 26,440 ; 35,207 : 47,359 ; 50,320 

Value (1,000 dollars) 


Metal-removing :::::: 

machine tools-: 139,941 ; 250,668 : 386,040 : 532,194 : 641,122 : 494,792 

Metal-forming :::::: 

machine tools-: 12,273 : 21,062 : 30,829 : 46,366 : 53,766 : 54,596 

Total-: 152,214 : 271,730 : 416,869 : 578,560 : 694,888 : 549,388 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


Table 13.—Metalworking machine tools: U.S. importers’ domestic shipments, by 

major types, 1977-82 


Item : 1977 : 1978 : 1979 : 1980 : 1981 : 1982 

• ••••• 


Quantity (units) 


Metal-removing :::::: 

machine tools-: 11,715 : 16,035 : 24,930 : 33,881 : 45,927 : 48,956 

Metal-forming :::::: 

machine tools-:_ 410 : _ 614 : 822 : _ 937 : _ 982 : _ 1,201 

Total-: 12,128 ; 16,649 : 25,752 : 34,818 : 46,909 : 50,157 

Value (1,000 dollars) 


Metal-removing :::::: 

machine tools-: 160,820 : 287,499 : 451,373 : 619,523 : 753,935 : 553,468 

Metal-forming :::::: 

machine tools-: 21,291 : 35,839 : 51,092 : 70,278 : 82.635 : 87,076 

Total-: 182,111 : 323,338 : 502,465 : 689,801 : 836,570 : 640,544 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 
















































30 


Table 14.—Metalworking machine tools: U.S. producers' export shipments, 

by major types, 1977-82 


Item 

1977 

1978 

1979 : 1980 

• 

• 

1981 

1982 




Quantity (units) 



Metal-removing 






machine tools- 

2,268 

3,072 

3,361 : 3,767 

3,086 

1,379 

Metal-forming 






machine tools- 

401 

384 

471 : 509 

456 

209 

Total- 

2,669 

3,456 

3,832 : 4,276 

3,542 

1,588 



Value (1,000 dollars) 


Metal-removing 






machine tools- 

131,406 

218,180 

214,420 : 355,047 

386,450 

229,340 

Metal-forming 






machine tools- 

20,878 

23,931 

31,466 : 47,381 

40,764 

21,697 

Total- 

152,284 

242,111 

245,886 : 402,428 

427,214 

251,037 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 
























31 


tools increased from $2.4 billion in 1977 to $5.6 billion in 1981, and 
decreased to $4.4 billion in 1982. 

Metalworking machine tool manufacturers sell their products predominantly 
through distributors and directly to end users. A limited number sell their 
products through agents or by other means. The major purchasers of machine 
tools, transportation equipment manufacturers, buy directly from the producer 
because of the sophisticated nature of the machine tools and the close working 
relationship that must be maintained between buyer and seller. Small job 
shops and other purchasers of metalworking machine tools generally buy from 
distributors, because they are buying standard ’’off the shelf” machine tools 
which do not require engineering changes that necessitate close association 
between buyer and manufacturer. 

As shown in table 15, U.S. producers’ capital expenditures for domestic 
facilities for production of metal-removing machine tools, as reported in 
response to the Commission's questionnaire, increased from $47 million in 1977 
to $149 million in 1981, and decreased to $88 million in 1982. Reported 
capital expenditures for metal-forming domestic facilities decreased from $102 
million in 1977 to $7 million in 1982, with slight variations in their 
downward trend in 1980 and 1981. 


Table 15. — Metalworking machine tools: U.S. producers' capital expenditures for 

domestic facilities, by major types, 1977-82 


(In thousands of dollars) 


Item 

1977 

1978 

1979 

1980 

1981 

1982 

Metal-removing machine 
tools: 

Land or land improve- 
ments- 

470 

1,419 

3,500 

2,443 

2,100 

1,035 

Building or leasehold 
improvements- 

5,967 

13,826 

15,540 

32,694 

27,953 

14,919 

Machinery, equipment, 
and fixtures- 

40,720 

48,181 

69,750 

86,948 

118,697 

71,852 

Subtotal- 

47,157 

63,426 

88,790 

122,085 

148,750 

87,806 

Metal-forming machine 
tools: 

Land or land improve- 
ments- 

405 

228 

105 

937 

122 

346 

Building or leasehold 
improvements - 

1,361 

972 

3,868 

2,046 

3,205 

1,277 

Machinery, equipment, 
and fixtures- 

100,259 

41,134 

7,432 

9,772 

12,017 

4,997 

Subtotal- 

102,025 

42,334 

11,405 

12,755 

15.344 

6,620 

Total- 

149,182 

105,760 

100,195 

134,840 

164,094 

.94,426 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 
























32 


Respondents to the Commission's survey reported yearly increases (except 
for a slight decrease in 1981) in research and development expenditures from 
1972 to 1982. Table 16 shows that the metal-removing sector again experienced 
the most significant gain, increasing erratically from $12 million in 1972 to 
$55 million in 1982. Overall, producers reported that net operating income 
increased from $203 million in 1977 to $554 million in 1981, and decreased to 
$399 million in 1982. Table 17 shows U.S. producers’ net sales and net 
operating income for 1977-82. 


Table 16.—Metalworking machine tools: U.S. producers’ research and develop¬ 
ment expenditures, by major types, 1972-82 


1972 

1973 

1974 

1975 

1976 

1977 

1978 

1979 

1980 

1981 

1982 


Source: 


(In thousands of dollars) 


: Metal-removing 
: machine tools 

Metal-forming 
machine tools 

Total 

: 12,003 

2,915 

14,918 

: 15,643 

2,915 

18,558 

: 15,023 

4,195 

19,218 

: 18,400 

4,187 

22,587 

: 22,164 

4,455 

26,619 

: 27,799 

5,435 

33,234 

: 31,715 

6,813 

38,528 

: 36,793 

5,823 

42,616 

: 48,053 

8,285 

56,338 

48,593 

7,254 

55,847 

: 55,142 

7,425 

62,567 


Compiled from data submitted in response to questionnaires of the 


U.S. International Trade Commission. 




















33 


Table 17.—Metalworking machine tools: U.S. producers' net sales and 
net operating income, by major types, 1977-82 


(In thousands of dollars) 


Item 

1977 

1978 

1979 

1980 

1981 

1982 

Metal-removing 

machine tools: 
Net sales- 

1,348,311 

1,822,435 

2,221,677 

2,802,600 

3,085,807 

2,297,089 

Net operating 
income- 

140,224 

209,580 

275,488 

414,785 

419,670 

310,107 

Metal-forming 

machine tools: 
Net sales- 

223,577 

297,754 

362,673 

406,030 

356,763 

227,947 

Net operating 
income- 

63,049 

83,073 

105,175 

123,433 

134,143 

88,443 

Total: 

Net sales- 

1,571,888 

2,120,189 

2,584,350 

3,208,630 

3,442,570 

2,525,036 

Net operating 
income- 

203,273 

292,653 

380,663 

538,218 

553,813 

398,550 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 

















34 


Research and development expenditures of U.S. producer respondents, 
expressed as a share of net sales, decreased from 2.1 percent in 1977 to 1.6 
percent in 1979, increased slightly to 1.8 percent in 1980, decreased to 1.6 
percent again in 1981, and increased to 2.5 percent in 1982. 

The demand for machine tools not supplied by domestic production will be 
supplied by imports. Based on 1982 dollars and 1981 production/employment 
relationships for machine tools, each $100 million in demand not supplied by 
U.S. firms translates into an estimated $185 million in lost production 
opportunities in all sectors of the U.S. economy and 2,575 jobs not 
created. 1/ In the machine tool sector alone, approximately $94 million in 
potential production is lost, along with 1,492 jobs. The estimated effects on 
all U.S. industry, assuming lost production opportunities of $100 million, is 
summarized in table 18. 


Table 18.—Metalworking machine tools: Effects of $100 million loss in U.S. 
demand of metalworking machine tools on the output and employment in all 
U.S. industry sectors 


Industry sector 

Employment lost 

Output lost 


No. of employees 

Million dollars 

Metalworking machine tools- 

1,492 

94 

Other manufacturing- 

563 

60 

Other- 

520 

31 

Total- 

2,575 

185 


Workers in the U.S. metalworking machine tool industry have sought and 
received trade adjustment assistance benefits from the U.S. Department of 
Labor. Since the Trade Adjustment Assistance program’s inception in April 
1975, 2/ there have been 8 certifications, affecting 679 workers, and 28 
denials, affecting 2,516 workers, for the metal-cutting machine tool sector, 
Standard Industrial Classification 3541. According to the U.S. Department of 
Labor, in the metal-forming machine tool sector, there was one certification, 
affecting 150 workers, and 13 denials, affecting 1,032 workers. 

The first U.S. company to apply for loans under the Department of 
Commerce’s trade adjustment assistance for firms which began in April 1975 was 
South Bend Lathe, Inc., which filed its petition in March 1981. Since then, 
and as of July 28, 1983, there have been 14 filings for assistance, 9 of which 
dealt with machine tools, 3 involved machine tools and parts, 1 involved 
machine tool components, and 1 involved machine tool controls. One filing 
involving machine tools was withdrawn, and four have decisions due in late 
summer 1983. The remainder of the filings received certification. 


1/ These estimates are based on the BLS input-output model. In the BLS 
model, certain components of machine tools are double counted; therefore, the 
’’output lost” data are overstated. 

2/ The program was established under the Trade Act of 1974. 















35 


The U.S. metalworking machine tool industry has sought several times in 
recent years to limit imports of foreign-made machine tools into the U.S. 
market. In November 1977, the National Machine Tool Builders' Association 
publicly charged European and Japanese machine tool builders with "apparently 
illegal and predatory practices", 1/ and was investigating the possibility of 
initiating dumping charges with the Government. The NMTBA asked its members 
to obtain information on the situation. However, the U.S. Department of 
Justice launched a Civil Investigative Demand, suspecting that price fixing may 
have been proceeding between segments of the U.S. industry and the Japanese. 

The NMTBA subsequently refrained from its pursuit of investigating dumping. 

In May 1982, Houdaille Industries, Inc., a diversified manufacturer of 
industrial products and also one of the top 10 manufacturers of machine tools 
in the United States, filed a petition with the United States Trade 
Representative asking that the investment tax credit be denied by the 
President to purchasers of Japanese-made machining centers and NC punching 
machines. The petition was submitted pursuant to section 103 of the Revenue 
Act of 1971, which empowers the President to deny investment tax credits to 
U.S. purchasers of foreign products which were manufactured in a country whose 
government pursued policies which restricted U.S. trade, such as cartels. 
Houdaille's petition presented information that Japan may indeed have fostered 
a cartel in the 1950's and 1960's, and that Japanese Government support was 
currently continuing. In April 1983, the petition’s request was denied, but 
the Government chose instead to pursue negotiations with the Japanese 
Government to discuss Japan’s industrial targeting policies in all areas of 
trade, not just in the machine tool sector. 

In March 1983, the NMTBA filed a petition with the U.S. Department of 
Commerce requesting the imposition of import quotas under section 232 of the 
Trade Expansion Act of 1962. Under section 232, the President is empowered to 
restrict imports if they threaten the national security. The petition 
requests that "[iImports of machine tools of one or more of the foregoing 
types would be permitted at levels between 17.5 percent and 20 percent of 
domestic consumption so long as the level of imports of other types was less 
than 17.5 percent of domestic consumption, provided that the sales-weighted 
average value of imports did not exceed 17.5 percent of domestic consumption 
in either the metal-cutting or metal-forming sector." 2 J The Department of 
Commerce will take 1 year to make its decision as to the petition's request. 

In May 1983, a joint United States-Japan machine tool industry task force 
was created during talks between the Office of the United States Trade 
Representative and the Japanese Ministry of International Trade and Industry 
(MITI). So far, the U.S. delegation has requested information on Mill’s 
Industrial Science and Technology Agency (AIST), subsidies received by the 
Japan Machine Tool Builders' Association from the Japan Keirin Association, 
and Japanese laws promoting the machine tool industry. 3/ 

1/ "Import Growth Worries Builders," American Machinist , December 1977, pp. 
41-42. 

2/ Petition Under the National Security Clause, sec. 232 of the Trade 
Expansion Act of 1962 (19 U.S.C. 1862), For Adjustments of Imports of Machine 
Tools submitted to the Department of Commerce by the National Machine Tool 
Builders' Association, p. 4. 

3/ Tsukasa Furukawa, "US-Japan Machine Tool Task Force Formed as Outcome of 
Tokyo Talks," American Metal Market , May 23, 1983, p. 16. 





36 


Government involvement 


The U.S. machine tool industry indirectly benefits from a variety of 
activities conducted by the U.S. Government. These activities are sponsored 
by a number of agencies which include the Department of Defense, National 
Aeronautics and Space Administration (NASA), the National Bureau of Standards’ 
Center for Manufacturing Engineering, and the National Science Foundation 
(NSF). Also, the Department of Commerce and the Export-Import Bank (Eximbank) 
of the United States provide assistance in the area of exports through export 
promotion and finance. The machine tool industry, like other U.S. industries, 
benefits indirectly through the nation's patent laws. The industry also 
receives tax incentives, including tax credits, tax deductions, and other tax 
benefits such as those found in the Economic Recovery Tax Act of 1981. On the 
State level, a number of programs exist in support of high technology, 
manpower assistance, and capital formation. 1/ 

The Department of Defense is involved with the industry through purchases 
of machine tools, manpower training programs, and also through research and 
development programs. Department of Defense acquistion of machine tools 
occurs through direct and indirect purchases. Direct purchases of 
metalworking machine tools by the three branches of the U.S. armed forces is 
quite small, compared with the consumption of the entire U.S. market. In 
fiscal year 1982, the U.S. Air Force purchased $12.5 million of machine tools 
and the U.S. Navy purchased $19.7 million, while in calendar year 1982 the 
U.S. Army purchased $33.9 million. 2/ Consumption by direct purchases for 
each of the services are presented in appendix F. The share of foreign-made 
machine tools in direct purchases by each of the Services varies from year to 
year, however, in FY 1982 the percentage was 18.8 for the U.S. Air Force, 21.4 
for the U.S. Navy, and in calendar year 1982, it was 3.6 for the U.S. Army. 

There are a number of reasons why the armed forces purchased foreign-made 
machine tools. The U.S. Air Force decided to purchase imports over 
domestically made machine tools because the foreign source made the low bid. 
The foreign contractor made the only responsive bid in one-third of the 
foreign buys. 3/ The U.S. Navy, after either applying or waiving the Buy 
American Act requirements pursuant to the Defense Acquisition Regulations, 
decided to purchase foreign-made machine tools, because they represented the 


1/ Office of Technology Assessment, Congress of the United States, 
Technology. Innovation, and Regional Economic Development: Background Paper. 

Census of State Government Initiatives for High-Technology Industrial 

Development . 1983. 

2/ Statistics compiled by the U.S. Department of Defense, Office of the 
Undersecretary of Defense, Research and Engineering, Acquisition Management, 
are by fiscal years for the U.S. Air Force and U.S. Navy and by calendar years 
for the U.S. Army. Figures for the U.S. Army in 1982 are incomplete. 

3/ U.S. Department of Defense, Office of the Undersecretary for Defense, 
Research & Engineering, Acquisition Management. 







37 


lowest conforming bid to procurement specifications. 1/ During 1977-82, the 
U.S. Army purchased 99 foreign-built machines. 2/ As described in a recent 
memorandum, the justification for purchasing foreign-built machines by the 
U.S. Army at times involved several reasons, which are listed as follows: 3/ 

Number of 


Reason responses 


Exchange dollars (e . g . , Foreign F-16 Buy)- 7 

Machines built abroad but U.S.-made controls were 

assembled to machine in United States- 8 

Lowest bid that met specifications- 11 

U.S. delivery lead time too long- 11 

Mainz Army Depot, West Germany, purchases not 

considered foreign- 14 

Memorandum of Understanding (MOU) 1/ with foreign 

country- 19 

U.S.-made machine did not have required capability- 26 

Lowest bid- 46 

Total-142 


1/ MOU defined in sec. 6 of the Defense Acquisition Regulations. Currently, 
MOU's are in effect with the United Kingdom, Norway, Netherlands, the Federal 
Republic of Germany, Italy, Portugal, Belgium, Denmark, Switzerland, and 
Australia. The United States also has in effect the F-5 program with 
Switzerland. 


The NMTBA perceives Department of Defense acquisition of machine tools in 
three categories—direct, indirect, and ’’induced capital” purchases, the last 
consisting of purchases by defense contractors, subcontractors, and suppliers 
for military equipment production. 4/ Estimates of Defense-related machine 
tool consumption are as follows: in 1977, consumption was $223 million; 1978, 
$255 million; 1979, $325 million; 1980, $364 million; 1981, $571 million; and 
1982, $564 million. 5/ Military prime contract awards for machine tools are 
as follows: 1977, $31.3 million; 1978, $60.6 million; 1979, $253.8 million; 
1980, $215.2 million; and 1981, $233.8 million. 6/ 


1/ Memorandum for the Deputy Under Secretary of Defense Research and 
Engineering from Assistant Secretary of the Navy (Shipbuilding and Logistics), 
Department of the Navy, undated, p. 7. 

2/ These are foreign-built machines; however, not all are considered foreign 
purchases (app. D). 

3/ Department of the Army, Office of the Assistant Secretary, memorandum for 
Deputy Under Secretary of Defense for Research and Engineering (Aquisition 
Management) from Office of the Assistant Secretary, Department of the Army, 
July 5, 1983, p. 5. 

4/ Statement by Fred T. Arnold, senior managing consultant, and George F. 
Brown, group vice president, Data Resources, Inc., representing the National 
Machine Tool Builders’ Association before the Joint Economic Committee, U.S. 
Congress, June 7, 1983, pp. 2 and 3. 

5/ Ibid., fig. A. 

6/ Otto Hintz, et al., U.S. Army Industrial Base Engineering Activity, 
Machine Tool Industry Study Final Report , Rock Island, Ill., Nov. 1, 1978, 
p. 22, estimate for 1977. For 1978-81, National Machine Tool Builders’ Asso¬ 
ciation, Economic Handbook of the Machine Tool Industry 1982-83 , 1983, p. 120. 


















38 


The Department of Defense also has extensive research programs oriented 
to manufacturing technology; the Department’s Manufacturing Technology Program 
(ManTech) is a broad-based, production-oriented program, whose goal is to 
insure timely, economical, and reliable production of Department of Defense 
material. In the 1950’s, the ManTech program was responsible for the 
development and initial bulk purchase of NC machine tools. Other 
accomplishments of the ManTech program include the establishment of 
Automatically Programmed Tools as a standard in the defense industry for NC 
machine tool programming and the establishment of isothermal forging as a net 
shape process for minimizing the use of critical materials and machining costs. 

Table 19 illustrates the ManTech funding levels for fiscal years 1978-82. 

Table 19.—Manufacturing Technology Program funding levels, by branches, 

fiscal years 1978-82 

(In millions of dollars) 


Branch . 1978 1979 t 1980 . 1981 1982 1/ 


Army-: 64 : 73 : 68 : 76 : 93 

Air Force-: 44 : 33 : 57 : 67 : 86 

Navy-:_ 10 : _ 20 : _ 14 : _ 13 : _30 

Total-: 118 : 126 : 139 : 156 : 209 


1/ Estimated. 

Source: Dr. Lloyd L. Lehn, Assistant for Manufacturing Technology, 

Industrial Resources, Office of the Secretary of Defense, Department of 
Defense, Manufacturing, Technology Program . Nov. 2, 1981, p. 3. 


The ManTech program will not buy capital equipment, but will provide ’’seed 
money” for projects whose feasibility has been demonstrated. ManTech results 
are frequently distributed to industry through the Manufacturing Technology 
Journal, the National Technical Information Service, the Defense Technical 
Information Center, and end-of-contract briefings. 

A number of other programs under the Defense Department have the 
potential for benefiting the machine tool industry: the Integrated Computer 
Aided Manufacturing program, the Electronics Computer Aided Manufacturing 
program, the Air Force's TechMod and Manufacturing Science programs, and the 
Navy’s Precision Engineering Program and Industrial Modernization Incentives 
Program (IMIP). 

The Department of Defense maintains two programs which have the goal of 
maintaining the defense industrial base: the Defense Industrial Reserve and 
the Machine Tool Trigger Order Program. 

The Defense Industrial Reserve was established by the Defense Industrial 
Reserve Act of 1973 and specifically authorizes the maintainence of a reserve 
of plants and equipment owned by the Department of Defense, including a 
















39 


machine tool reserve and a reserve of other industrial manufacturing 
equipment, for use by the armed forces in contingencies. 1/ 

As of December 31, 1982, the Department of Defense managed 120 government- 
owned industrial plants and maintenance facilities. Aircraft, missiles, 
ammunition-propellant, combat vehicles, electronics and communications, and 
weapons were produced at the industrial plants; the maintenance facilities 
performed aircraft, electronic, ship, and weapon/vehicle repairs, as well as 
multimission services. There are 103 active plants and facilities with the 17 
remaining retained ”in an inactive status to satisfy contingency 
requirements.” 2/ Contractors operate 68 of the plants/facilities, and the 
other 52 are Government operated. 3/ 

The Department of Defense General Reserve is made up of idle Industrial 
Plant Equipment, which is primarily general-purpose metal-cutting and metal- 
forming machine tools. Equipment redistributed in support of military service 
requirements had an acquisition cost of $45.8 million during 1982. During 
1982, the General Reserve received 1,965 items from idle declarations for 
retention; 2,982 items were redistributed from the General Reserve for use. 4/ 


The General Reserve, under the Defense Industrial Reserve Act of 1973, is 
authorized to lend machine tools and other industrial equipment to qualified, 
nonprofit, educational institutions or training schools. Known as the Tools 
for Schools Program, the program had 735 active loans, with an acquistion cost 
of $48.9 million in 45 States by the end of 1982. The participating schools 
receive free use of the equipment. Several benefits are derived from this 
program: the tools are maintained in the reserve without cost to the 

Government and yet are readily accessible for meeting emergency needs; and a 
reserve of skilled labor is formed within the defense industrial base. The 
Defense Industrial Reserve Report for 1982 states that, "A majority of the 
trainees who have completed training under the Tools for Schools Program have 
obtained employment in private industry." 5/ Complementing active and idle 
Industrial Plant Equipment are Plant Equipment Packages (PEP’s), which produce 
specific end items or material. PEP's may include either a few machine tools 
or a complete production line of machine tools. The following tabulation 
depicts the General Reserve as of December 31, 1982: 


Status 


Industrial 
plant equipment 

(units) 


Acquisition 

cost 

(million dollars) 


In storage- 15,919 

On loan to schools- 4,421 

On loan to other 

Government agencies- 630 

Total- 20,970 


$377.3 

39.3 

13.9 

$430.5 


1/ 50 U.S.C. pp. 451-455 (1976). See Public Law 93-155. 

2/ Department of Defense, Defense Industrial Reserve Report, January 
1982-December 1982 , undated, p. 1. 

3/ Ibid. 

4/ Department of Defense, Defense Industrial Reserve Report, January 
1982-December 1982 , undated, p. 2. 

5/ Ibid., pp. 2 and 3. 


















40 


In August 1982, the Machine Tool Trigger Order Program was authorized 
under title III of the Defense Production Act. The purpose of the program is 
to reduce mobilization lead times for machine tools essential to defense 
production through standby purchase agreements between machine tool firms 
participating in the program and the Federal Government. The standby 
agreements identify the machine tools that a participating firm would produce 
during an emergency. The great majority of machine tools manufactured under 
the Machine Tool Trigger Order Program would be delivered directly to defense 
contractors, with the sale proceeding in a normal commercial fashion. Machine 
tools produced under contract in excess of actual needs would be purchased by 
the Government 1 year after the emergency had ended at 90 percent of the 
prevailing retail price and held until a buyer is located. Once a buyer is 
located, the manufacturer would be paid the remaining 10 percent of the 
purchase price. The agreements are to assure production for the first 6 
months of an emergency and also to outline the financing, advance-payment 
agreements, the specifications and performance profiles for the production of 
the equipment, as well as the priority access to materials and components used 
in production. Production is initiated by the declaration of an emergency. 

The estimated dollar value of the Standby Agreements to be signed over 
the next 3 years (1982-85) is $1.5 billion. 1/ However, no funds are paid for 
purchases in advance of an emergency. In late July 1983, there were 53 
Standby Agreements signed, covering over 4,000 items, worth $710 million 
dollars. 2/ This puts the program one-third of the way towards its goal of 
150 signed agreements. The dollar estimate for each major type of machine 
tool is as follows: $350 million for machining centers, $150 million for 
boring machines, $100 million for gear-cutting machines, $150 million for 
grinding machines, $80 million for automatic turning machines, $250 million 
for turning lathes, $340 million for metal-forming machine tools, and 
$80 million for other types of machine tools. 3/ These are predominately 
catalog items to be purchased at the then-prevailing retail price. The 
initial agreements have concentrated on CNC turning equipment, machining 
centers, grinding machines, gear cutters, and large vertical and horizontal 
boring mills. 4/ 

The overall responsibility for the Machine Tool Trigger Program rests 
with the Federal Emergency Management Agency (FEMA), with the participation of 
the Department of Defense and the Department of Energy for identifying the 
relevant requirements, the General Services Administration (GSA) for providing 
contract development and administration, and the Department of Commerce for 
identifying the machine tool products in the market matching the requirements, 
identifying the contractors, as well as reviewing Departments of Defense and 
Energy specifications, machine tool prices, and the quantity of machine tools 
required. 

Other Government agencies are involved in supporting manufacturing 
research. The NSF has a number of programs which are sources of funds for 
production research. The Production P.esearch Program provides funds directly 


1/ Federal Emergency Management Agency, FEMA Forum . November 1982, p. 2. 

2/ Telephone conversation with Joe Minor, project officer, FEMA Machine Tool 
Trigger Order Program, July 25, 1983. 

3/ Federal Emergency Management Agency, op. cit., p. 3. 

4/ Rosanne Brooks, "US Tool Builders Sign $480 M Trigger Pacts", American 
Metal Market , May 23, 1983, p. 16. 






41 


for production research; the Industry/University Cooperative Research Program, 
the Innovation Process Research Program, and the Small Business Innovation 
Program are primary sources of funds for augmenting the budget of the 
Production Research Program. The Social and Economic Sciences Programs and 
the International Programs are other sources of funds. NSF’s Production 
Research Program has the objectives of providing financial support for 
research, which leads to substantially higher productivity, and insuring a 
sufficient number of manufacturing engineers for university faculties and 
industry. NSF's Production Research Program performs several activities: (1) 
identifies major research needs and acquires the necessary resources to 
realize those needs; (2) provides funding for research by universities and 
nonprofit organizations, industry/university partnerships, and small business; 
and (3) works with universities which are trying to establish manufacturing 
research programs. Other activities are the establishment of international 
programs, which include staff visits, planning conferences, and the exchange 
of engineers, and participation of the Production Research Program in intra- 
and inter-agency activities. 1/ Table 20 depicts the NSF Production Research 
Program for fiscal years 1980-84. 


Table 20.—National Science Foundation Production Research Program and 

Augmentation funding, fiscal years 1980-84 


(In millions of dollars) 


Item 

1980 

1981 

1982 

1983 

1984 

Production Research Program- 

Augmentation- 

2.3 
1/ .2 

2.8 

2/ 

3.1 

2/ 

3.5 

1/1.5 

4.6 

2/ 


1/ Estimated. 

2/ Not available. 


Source: W. M. Spurgeon, "Production Research Program, National Science 
Foundation," Tenth NSF Conference on Production Research and Technology, 
Detroit, Mich., March 1983, p. 6. 


Currently, there are two projects in NSF’s Small Business Program which 
are in the area of production research: grinding and optical gaging. 2/ For 
a complete listing of NSF Production Research Program recent projects in FY 
1983, see appendix G. 

The Center for Manufacturing (CME) is an operational unit of the National 
Engineering Laboratory of the National Bureau of Standards. CME's program 
goal is to enhance the technology base which supports innovation and 
productivity in the discrete-parts-manufacturing industries. Currently, CME 


1/ W.M. Spurgeon, "Production Research Program, National Science 
Foundation," charts used in talk at the Tenth NSF Conference on Production 
Research and Technology, Detroit, Michigan, March 1983, p. 33. 

2/ Telephone conversation with Dr. W. M. Spurgeon, director, Production 
Research Program, National Science Foundation. 













42 


supports the discrete-parts-manufacturing industries through the development 
of technical data, findings, and standards in the areas of manufacturing 
engineering, mechanical metrology, automation and control technology, and 
industrial and mechanical engineering. 

In 1968, the CME conducted research on developing computer-controlled 
coordinate-measuring machines (CMM), and by 1980, calibration routines had 
been developed, thus allowing their widespread adoption. Although the CMM 
program is still in operation in FY 1982, CME effort in this area is minimal. 
The result of the CMM program has been a proposed standard currently in draft 
form. Research on CMM's lead to efforts by the National Bureau of Standards 
to investigate quality-control systems from the perspective of the behavior of 
the systems, as opposed to the nature of the product. Much of CME's 
Automation Research Program is directed toward taking this concept from the 
work station and implementing it in a machining cell. Robots with enhanced 
sensory perception are required for this application to be realized. Thus, 

CME is researching robot vision systems. 

Another area of activity at the CME has been the development of an 
interface standard for communication CAD systems and CAD/CAM systems, thus 
allowing small CAD/CAM systems to be integrated into larger CAD/CAM systems. 
Through a program sponsored by the U.S. Air Force Integrated Computer Aided 
Manufacturing and NASA, NBS coordinated a consortium of approximately 
45 to 50 private companies and produced a national standard, ANSI (American 
National Standards Institute) Y14.26M, which was adopted on September 21, 

1981. This program was organized in October 1979, and the ANSI Y14.26 M 
standard is the first of many standards to be developed by this organization. 

In fiscal year 1981, the NBS began funding the Automated Manufacturing 
Research Facility (AMRF), located in the CME's Instrument Shop. The AMRF is 
to be completed in FY 1986. The AMRF, which superfically resembles an FMS, 
under current plans will have the following work stations: horizontal 
machining, vertical machining, turning, cleaning and deburring, inspection, 
materials inventory, transfer system, and housekeeping system. The AMRF is 
equipped with standard model, general-purpose machine tools which are 
representative of those in common use throughout the United States. The CME 
is presently conducting two projects—one in robotics, the other in precision 
machining—both of which will develop subsystems for the AMRF. 1/ 

The AMRF is available to universities and industry for ’'nonproprietary 
research in manufacturing engineering which lies further afield than the 
metrology and standards of NBS.” 2/ Cooperative research efforts are 
conducted through the NBS Industrial Research Associate Program by employees 
of manufacturers. 3/ Indirect contacts between the CME and industry include 
completed negotiations between NBS and two corporations (but not machine tool 


1/ J.A. Simpson, R.J. Hocken, J.S. Albus, "The Automated Manufacturing 
Research Facility of the National Bureau of Standards,” Journal of 
Manufacturing Systems vol. 1, No. 1, 1982, p. 23. 

2/ Ibid., p. 31. 

3/ Currently, the NBS Industrial Research Associate Program under the CME 
has the following participants: Brown & Sharpe, TRW, Hardinge Brothers, 
Monarch Machine Tools, the U.S. Bureau of Engraving and Printing, Science 
Applications, Inc., Honeywell, and John Deere. 





43 


builders) to commercially license the manufacture of sensors which detect the 
sharpness of a drill bit. The NMTBA’s Technical Committee provides 
information and advice to the Automation Research Program; however, no formal 
relationship exists. The CME, through the Automation Research Program, also 
maintains relationships with universities encompassing small grant programs, 
cooperative work-study arranagements, and summer programs at the NBS for 
undergraduate engineers. Table 21 depicts the NBS’s Center for Manufacturing 
Engineering budget for fiscal years 1982-84. 


Table 21.—NBS’s Center for Manufacturing Engineering budget, by programs, 

fiscal years 1982-84 


(In millions of dollars) 

CME programs 

1982 

1983 

1984 1/ 

Mechanical engineering metrology- 

3.3 

3.5 

2/3.9 

Automation manufacturing interface-standards— 

2.3 

1.9 

3/ 1.9 

Total- 

5.6 

5.4 

5.8 


1/ FY 1984 appropriations before Congress. 

27 Augmenting the Mechanical Engineering Metrology Program is another 
$3.8 million; $1 million is from the Navy; $200,000, from the Army; other U.S. 
Government agencies provide $300,000, miscellaneous funding sources contribute 
$200,000, NASA for $250,000, Treasury for $250,000; and $1 million for 
calibrations from the National Bureau of Standards. 

3/ Augmenting the Automation Manufacturing Interface Standards Program is 
another $1.5 million, of which $1.0 million is from the Navy, Army, and Air 
Force. 

Source: Hearings before the Appropriations Committee, Subcommittee on 

State, Justice, Commerce and Related Agencies, House of Representatives, U.S. 
Congress, 98th Congress, 1st Session. 


The Eximbank’s program in 1980 supported the machine tool industry with 
the following assistance: $230,000 in short-term insurance; $3.7 million in 
medium-term insurance; $849,000 under the Cooperative Financing Facility (CFF) 
program; $6.7 million in bank guarantees; $5,042 million in discount loans; 
and $5.1 million in financial guarantees (app. F shows annual Eximbank 
financial support to the machine tool industry). 1/ Table 22 presents 
Eximbank support for the machine tool industry for active cases as of the end 
of 1982. However, the Eximbank minimum loan requirements and payback period 
frequently are not conducive to machine tool exports. In some cases, the 
financing of a machine tool sale was denied by Eximbank on the grounds that 
the sale would ultimately harm another U.S. industry. If exported, the 
machine tool would be used to manufacture a product which would compete with a 
U.S. product. 2/ 


1/ United States Trade Representative, Trade Policy Sector, Draft Document 
82-53, Sector Financing Review , 1980. Based on a survey of Eximbank users. 
2/ Commission staff interview with Eximbank officials. 













44 


Table 22.—Eximbank support for the machine tool industry, by type of 

program, as of Dec. 31, 1982 


(In thousands of dollars) 


Program 

Number of 
active cases 

Export 

value 

Authorization 

bank 

Disbursed 

amount 

Direct loans- 

2 

41,200 

20,700 

19,000 

Cooperative Financing 
Facility- 

41 

20,100 

14,000 

8,500 

Discount loans- 

49 

35,500 

27,900 

15,400 

Financial guarantees- 

6 

1/ 

1,600 

1,400 

Bank guarantees- 

28 

37,900 

28,900 

22,800 

Medium-term insurance- 

7 

7,386 

5,700 

5,400 

Short-term insurance- 

92 

103.400 

95.300 

94.400 

Total- 

225 

245,486 

194,100 

166,900 


1/ Included in direct loans. 


Source: Export-Import Bank of the United States. 


In the area of patent law, the Bayh-Dole Act provides that organizations 
may elect to retain title to their inventions which were funded through 
Government research and development contracts or grants. 1/ In 1981, the law 
was expanded by presidential memorandum to include all organizations engaged 
in Government-funded research as opposed to just small businesses and 
nonprofit organizations, as was the case before 1981. 2/ Another law in the 
area of promoting innovation in technology is the Stevenson-Wydler Technology 
Innovation Act of 1980. 3/ The act authorizes Government units to actively 
promote technological development and the diffusion of technology to the 
private sector. One Government program created under the act is the Large 
Scale Industrial Partnership Program, established under the Office of the 
Assistant Secretary for Productivity, Technology, and Information in the 
Department of Commerce. The program allows for the establishment of Research 
and Development Limited Partnerships (RDLP's), which minimize antitrust 
problems, occur on a scale beyond that which any individual U.S. firm could 
implement, and are funded through tax incentives already in existance. RDLP's 
were promoted at a recent meeting of Commerce officials and the NMTBA to the 
machine tool industry. 4/ 

In the area of technology, at least within the U.S. Patent System, the 
United States maintains a slight edge in machine tool innovation and in 
innovation of machine tool controls as measured by the number of patents 
granted. During 1977-82, the share of patents of U.S. origin to total patents 
in the area of metalworking machine tools was roughly 60 percent; those of 


1/ 35 U.S.C. 200 et seq. (supp. V 1981). 

2/ Government Patent Policy, Memorandum from the President, Weekly 
Compendium of Presidential Documents 252, Feb. 21, 1983, p. 19. 

3/ 15 U.S.C. 3701 et seq. 

4/ May 6, 1983. 


















A 5 


foreign origin accounted for roughly AO percent. 1/ U.S. Government-owned 
patents for patents of U.S. origin and foreign-government-owned patents for 
patents of foreign origin accounted for 1 percent or less of the total number 
of patents in the machine tool area during 1977-82. 2/ The United States is 
followed by West Germany and then by Japan in the number of patents held in 
the U.S. Patent System in the area of metalworking machine tools. In the area 
of machine tool controls, the U.S. percentage of patents has declined 
slightly, from roughly 55 percent in 1977 to 51 percent in 1982; the percent 
of patents of foreign origin has increased from A5 percent in 1977 to A9 
percent in 1982. Japan, so it would appear, is, by far, the most innovative 
foreign holder of U.S. patents in the area of machine tool controls, holding 
18 percent of the total number of patents in 1977 and 31 percent in 1982. 

Japan is followed by West Germany and then the United Kingdom (app. F). Table 
23 presents patent activity for metalworking machine tools and controls for 
machine tools in the U.S. Patent System for 1977-82 in terms of ownership by 
origin. 

In the area of tax subsidies for private sector research and development 
and investment, the U.S. Government enacted the Economic Recovery Tax Act of 
1981 (ERTA). The ERTA provided to businesses a tax credit of 25 percent of 
the actual increase in research and development expenditures over a 3-year 
base period. Other provisions in the area of research and development 
provided by the ERTA include a corporate charitable deduction for used 
research and development equipment 3/ and revised rules pertaining to research 
and development deductions allocated against U.S. source income. A/ 

The ERTA also provided other tax incentives to spur new investment in 
production facilities, such as the accelerated-cost recovery system (ACRS) and 
safe-harbor leasing rules, which allow firms that are in a financially 
precarious situation to sell their unused tax credits. However, since the 
ERTA's enactment in 1981, the U.S. Congress has put M new limits on the 
investment tax credit, repealing increases in ACRS benefits scheduled for 1985 
and 1986, halving the benefits of safe-harbor leasing, and then abolishing it 
altogether as of January 1, 198A." 5/ The Tax Equity and Fiscal 
Responsibility Act of 1982 reduces by 57 percent the tax benefits of 1981 when 
the 1982 tax act effects are calculated out to 1986. 6/ An estimate of how 
adversely the machine tool industry will be affected is shown in the effective 
tax rates in 1986 for the machinery industry. Under the 1980 law, the rate is 
38.2 percent; under the 1981 law, the rate is 10.6 percent; and under the 1982 
law, the effective tax rate is 25.7 percent. 7/ 


1/ Statistics compiled by U.S. Department of Commerce, Patent and Trademark 
Office, Office of Technology Assessment and Forecast. 

2/ It was not possible to ascertain from the data the number of Government- 
funded inventions that have been patented. 

3/ 26 U.S.C.A. 170(e) (West 1978 and supp. 1983). 

A/ 26 U.S.C. 861 (supp. 1983). 

5/ Richard I. Kirkland Jr., "Taxing the Business Lobby’s Loyalty," Fortune , 
Oct. 18, 1982, p. 1AA. 

6/ Ibid. 

7/ Ibid. 




Table 23.—Metalworking machine tools: Patent activity for metalworking machine tools and controls 

for machine tools in the U.S. Patent System, by origins, 1977-82 JV 


46 





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47 


Japan 

The Japanese metalworking machine tool industry today is recognized as a 
world leader in both the sophisticated technology of its machines and in the 
output of machine tools. The current position of Japan's machine tool 
industry is in part a result of Japanese Government involvement in the 
promotion of the industry through laws, guidance to the industry, preferential 
loans, subsidies, and tax incentives. 


Industry 

At the end of 1979, the Industrial Census of the Government of Japan 
listed 1,902 manufacturing facilities for metal-cutting machine tools, with 
1,339 of these establishments employing fewer than 10 persons. In 1980, there 
were 1,972 firms in the Japanese metal-cutting machine tool industry. In 
1975, the Japanese machine tool industry was composed of 1,949 firms which 
manufactured solely machine tools, 4 of which were subsidiaries of U.S. firms, 
and 1 that was a subsidiary of another foreign country. 1/ As of August 1982, 
the Japanese Machine Tool Builders' Association (JMTBA) had 113 members. 
Japanese machine tool builders can be categorized as manufacturers of general 
machine tools, machining centers and NC lathes, machining centers, NC lathes, 
and special machines in the areas of grinding machines, gear-making machines, 
and electrical discharge machines. In the first quarter of 1983, there were 
148 builders in Japan supplying NC machine tools; 62 firms were manufacturing 
machining centers, 57 firms were producing NC lathes, and 29 firms were 
manufacturing other types of NC machine tools. 2/ 3/ The Japanese Machine 
Tool Builders' Association (JMTBA) listed 100 machine tool builders, 68 of 
which produced metal-cutting machine tools, and 10 trading firms as members in 
1977, and 95 machine tool builders and 8 trading firms in 1978. 4/ 5/ In 
1979, the 109 JMTBA members accounted for 87.9 percent of Japan's machine tool 
output. 6/ As of August 1982, the JMTBA had 113 members. 

Employment in the Japanese metalworking machine tool industry during 
1977-82 is depicted in table 24. 


1/ U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine tools-Japan , Washington, D.C., CMS 79-407, August 
1979, p. 6. The Survey cites the Japanese Ministry of International Trade and 
Industry, Census of Manufacturers 1975: Report by Industries , and Marunouchi 
Research Center, Japanese Subsidiaries of Foreign Companies, 7th Edition . 1977. 

2/”Study Says 148 NC Machine Builders Are Active in the Market,” Metal¬ 
working Engineering & Marketing , May 1983, p. 44. 

3/ Ibid. pp. 44 and 45. 

4/ Japan Machine Tool Builders' Association, Japan Machine Tool Industry 
1977 , Tokyo, Japan, 1977, p. 123-148. Japan Machine Tool Builders' 

Association, Japan Machine Tool Industry 1978 , Tokyo, Japan, 1977, p. 131-156. 

5/ Japan Machine Tool Builders’ Association, Japan Machine Tool Industry , 
Tokyo, Japan, 1977, p. 149. 

6/ Japan Economic Yearbook 1977/78 , The Oriental Economist 1978, p. 123. 















48 


Table 24.—Number of employees in the Japanese metalworking machine tool 

industry, by major types, 1977-82 1/ 


Year 

Metal-cutting machine 
tool industry 

Metal-forming ma¬ 
chines industry 2/ 

Total 

1977 

32,168 

7,566 

39,734 

1978- 

28,154 

7,889 

36,043 

1979 

31,113 

7,374 

38,487 

1980 

33,737 

7,962 

41,699 

1981- 

33,883 

8,346 

42,229 

1982- 

34,146 

6,500 

40,646 


1/ Based on persons employed at facilities with 50 or more employees. Based 
on Current Production Statistics Survey, MITI, which may omit seasonal 
employees at facilities when the products under survey are not the principal 
product. 


2/ Employment figures derived from share of metal-forming machine industry 
output, valued in yen, as a percent of the machine and casting machine 
industry, which includes rolling mill machine industry, tube mills and 
finishing equipment industry, roll industry, metal-forming machine industry, 
automatic gas cutting machine industry, and foundry machinery equipment 


industry. 


Source: Information supplied by Wender, Murase, and White, counsel for the 

Japan Machine Tool Builders' Association, Japan Metal Forming Machine 
Builders' Association, and Japan Machinery Exporters’ Association to the U.S. 
International Trade Commission, Aug. 5, 1983. 


In 1975, employment in this industry totaled 54,080 persons, with 1,778 
firms employing 1 to 49 persons, 132 firms employing 50 to 299 persons, and 34 
firms employing over 300 persons. 1/ In 1980, the majority of Japanese 
metal-cutting machine industry firms, that is 1,593 firms, or 80 percent, 
employed from 1 to 19 workers; at the other extreme, 6 firms had employment of 
1,000 workers or greater. Compiled from data in the MITI, Industrial Census, 
1980. the following tabulation depicts the industry in 1980, by number and by 
sizes of firms and share of production. 


Number of employees 

Number 

of firms 

Percent 

of total 

Percent of 

total output 

1 to 19- 

1,593 

80.8 

6.2 

20 to 49 

192 

9.7 

8.1 

50 to 99 

83 

4.2 

9.6 

100 to 299 

74 

3.8 

24.8 

300 to 999- 

24 

1.2 

13.9 

1,000 plus- 

6 

.3 

37.4 

Total- 

1,972 

100.0 

100.0 


1/ Op. cit. 































49 


Although a system exists for subcontracting to larger companies by 
smaller firms throughout the economy, usually utilizing nonunionized labor, it 
is not known to what extent this occurs in the machine tool industry. 1/ In 

1981, the annual earnings of factory workers in the industry appeared to range 
from $12,000 to $18,000, including bonus, but excluding fringe benefits, such 
as company housing, free medical treatment, and other benefits. 2/ Earnings 
for professional employees, including engineers, ranged from $15,000 to 
$35,000 per year. 3/ 

In 1982, Japanese metalworking machine tool production was valued at 
$3.9 billion, decreasing from $4.8 billion in 1981. At the end of 1977, 
production was valued at $1.6 billion. 4/ Exports followed the same pattern 
as production, decreasing to $1.3 billion in 1982 from $1.7 billion in 1981. 
Exports totaled $616.4 million in 1977. Imports of metalworking machine tools 
increased to $228.4 million in 1982 from $215.8 million in 1981. In 1980, 
imports totaled $229.3 million, increasing from $87.8 million in 1977. 
Consumption followed the same trend as production, imports, and exports. In 

1982, consumption totaled $2.8 billion, decreasing from $3.3 billion in 1981. 
Consumption totaled $1.1 billion in 1977. 

In 1982, exports as a share of production decreased to 33 percent from 
43 percent in 1978. Exports as a share of total production were 38.5 percent 
in 1977. Over the same period, imports as a share of apparent consumption 
remained fairly stable, averaging around 8 percent. In 1982, imports as a 
share of consumption were 8 percent, down from 9 percent in 1980. However, 
another trend that is very pronounced in the Japanese metalworking machine 
tool industry is the increase in metal-cutting machine tools relative to 
metal-forming machines. In 1977, the ratio of metal-cutting to metal-forming 
machine tools was 2.6:1, rising to 4.1:1 in 1981 and 5.1:1 in 1982. 

Over the past few years, Japanese machine tool builders have established 
assembly and production operations overseas. In 1978 and 1979, Japanese 
manufacturers were ’’either opening plants or contracting to have machines 
built in Korea, Singapore, and Taiwan.” 5/ Yamazaki Machinery Works Ltd. 
established Yamazaki Machinery Corp. (U.S.) in Kentucky to produce machining 
centers and NC lathes. Makino Milling Machine Co. Ltd. acquired majority 
ownership of LeBlond to form LeBlond Makino Tool Co. Ltd. in Cincinnati. 
Japanese firms such as Hitachi Seiki Co. Ltd., Mitsubishi Heavy Industries 
Ltd., and Toyoda Machine Works Co. Ltd. have either assembly operations in the 
United States or licensing arrangements with U.S. manufacturers to produce 
Japanese-designed machines. Japanese machine tool builders also have 
licensing and joint ventures with European firms, such as between Fanuc Ltd. 
and Siemens to produce NC lathes. 


1/ Robert C. Wood, "Japan’s Multitier Wage System,” Forbes , Aug. 18, 1980, 
pp. 53-58. 

2/ Meeting the Japanese Challenge , National Machine Tool Builders’ 
Association, McLean, Va., Sept. 14, 1981, p. 26. 

3/ Ibid. 

4/ Figures for production, exports, imports, and consumption are from 
American Machinist , February issues, 1979-83. 

5/ Anderson Ashburn, "Collapsing Dollar Distorts Study,” American Machinist , 
Feburary 1979, p. 83. 







50 


Japanese machine tool builders may have been dissuaded from establishing 
manufacturing facilities overseas because of their subcontractor 
relationships. For Japanese firms in general— 

"The design and production capabilities of equipment 
manufacturers are generally linked to an intricate network of 
subcontractors whose quality and prices they are able 
stringently to control. It is for this reason that Japanese 
manufacturers are seriously inhibited when they attempt to set 
up overseas manufacturing operations, since they generally 
encounter considerable difficulties in duplicating the 
intricate networks of reliable subcontractors that can deliver 
quality components at low costs.” 1/ 


Government involvement 


In the 1950’s and 1960*s, the Japanese Government used a variety of 
approaches to develop the country's industrial machinery industry. These 
included: the enactment of laws to promote the industry; low-interest loans 

from the Japan Development Bank; 2/ authorization of cartels for purchasing 
parts and importing materials; Government formation of industry associations 
and their subsidization; rationalization of the industry, 3/ decreed by law, 
through elimination of inefficient firms and later through allocation of 
product categories to companies; import bans on foreign machinery to spur 
domestic production; 4/ and tax incentives, including tax-free export income 
and a series of depreciation schedules. 5/ 

The Japanese Government enacted three laws and Cabinet orders which have 
specifically affected the promotion of the machine tool industry, 

o Extraordinary Measures Law for Promotion of Machinery 

Industry, Law No. 154 of June 15, 1956. This law promotes 
the machinery industry through rationalization. 

o Enforcement Order for the Extraordinary Measure Law for 
Promotion of Machinery Industry, Cabinet Order No. 238, 

July 20, 1956. This order specifies the metal-cutting 
machine tool sector for promotion and authorizes funds or 
loans. 


1/ Jack Baranson, Automated Manufacturing;: The Key to International 
Competitiveness—And Why the United States is Falling Behind . Developing 
World Industry and Technology, Inc. Washington, D.C., 1983, p. 111. 

2/ Available to all industries. Industry members must request the loan. 

3/ Not used by the Ministry of International Trade and Industry (MITI) after 
1960, although the option was available. Rationalization was pursued 
subsequently by the industry, with the Government approving or dissapproving 
the action requested. 

4/ In the 1950’s. 

5/ I. Magaziner and T. Hout, Japanese Industrial Policy . 1980, pp. 90-97. 







51 


o Extraordinary Measures Law for Promotion of Specific Electronic 
Industries and Specific Machinery Industries, Law No. 17 of 1971. 
This law authorizes appropriation of the necessary funds or 
facilitates loans for the industry. 

o Enforcement Order of the Extraordinary Measures Law for Promotion of 
Specific Electronic Industries and Specific Machinery Industries, 
Cabinet Order No. 197, June 21, 1971. This order designates 
metal-cutting machines, NC metal-cutting, CNC metal-cutting, 
metal-forming, NC Metal-forming, and CNC metal-forming machine tools 
as types of machinery to be promoted. 

o Extraordinary Measures Law for the Promotion of Specific Machinery 
and Information Industries, Law No. 84 of 1978. This law promotes 
the introduction of modern production techniques and rationalization 
of production, as well as securing the necessary funds or 
facilitating loans to the industry. 

o Enforcement Order of the Extraordinary Measures Law for Promotion of 
Specific Machinery and Information Industries, Cabinet Order No. 

342, September 29, 1978. This order specifies CNC metal-cutting 
machine tools with simultaneously controlled multiple spindles, high 
performance module structure numerically controlled metal- cutting 
machines tools, as well as the most advanced types of metal-forming 
machine tools for promotion by 
industry. 1/ 


In 1978, under Public Law No. 84, the Japan Development Bank and the 
Small Business Finance Corporation were able to make loans available to the 
industries designated by legislation. This law is presently in effect in 
Japan. The loans have preferred interest rates. Loan interest rates under 
this legislation are as follows: 

Special interest rate-7.3-8.3% 

Regular interest rate (long term prime rate)- 8.4% 1/ 

1/ MITI, Japan. 


The Small Business Finance Corporation (SBFC) loans have an expenditure 
ceiling of Y220 million (approximately $883,000 at 1982 exchange rates) for 
direct loans when combined with general loans and Y30 million ($121,000) for 
agency loans aside from general loans. A grace period of up to 2 years was 
given to borrowers with up to 10 years for loan maturity. Loans from the 
Japan Development Bank could pay for up to 50 percent of the total equipment 
and construction costs of a project. The typical loan maturity was 7 years, 
but could fall within a period of greater than 5 years but less than 10 
years. The borrower receives a grace period of approximately 1 year. 


1/ Computer-Aided Manufacturing: The Japanese Challenge, comments submitted 
to the U.S. International Trade Commission, investigation No. 332-149, by 
Cravath, Swaine, and Moore, counsel for Cincinnati Milacron, Dec. 14, 1982, 
App. 4. 




52 


Projects involving primarily machines, parts, and semifinished goods for 
parts for NC metalworking machine tools with precision position via feedback 
central, NC automatic forging equipment, industrial robots, and high- 
performance, computer-operated, automatic design equipment (presumably CAD) 
were eligible to receive loans with interest rates of 6.65 percent under 
legislation to promote industrialization. Loans received for projects 
involving machines, parts, and semifinished goods for parts of NC metalworking 
machine tools and industrial robots under legislation for promoting 
rationalization qualified for interest rates of 7.7 percent. 1/ 

During 1978-82, the Japan Development Bank (JDB) gave the following loans 
for the ’’Elevation Plan” of the Electronics and Machinery Industry: for the 
metal-cutting machine tool industry in fiscal year 1979, one loan for 170 
million yen ($774,840); in 1980, one loan for 100 million yen ($441,033); and 
in 1982, two loans totaling 1,300 million yen ($5.2 million). However, during 
1978-82, the JDB did not provide any loans to the metal-forming sector of the 
industry. 2/ The SBFC, under the Elevation Plan of the Electronics and 
Machinery Industry, provided the following loans: for the metal-cutting 
sector, four loans in fiscal year 1979 totaling 345 million yen ($1.57 
million); in 1980, one loan for 80 million yen ($352,827); in 1981, three 
loans for 420 million yen ($1.9 million); and in 1982, two loans for 270 
million yen ($1.08 million). 3/ The SBFC provided one loan for 60 million yen 
($264,620) for the metal-forming sector, and in 1981, four loans totaling 535 
million yen ($2.4 million). 4/ 

Although the total corporate tax rate in Japan is 54 percent, 
depreciation deductions for newly purchased capital equipment and for employee 
benefits significantly reduce a company’s tax burden. 5/ In the area of tax 
incentives, Japanese machine tool builders receive a partial tax exemption on 
royalty income from abroad. Also, a tax credit of up to 25 percent is 
received if research and development expenditures in the current year exceed 
those of the previous year. Finally, twice the normal 12-year depreciation 
rate is granted for capital investment in pollution control devices. 6/ 

The involvement by the Japanese Government in the financial markets 
through institutions such as the Japan Development Bank or the Japan Export 
and Import Bank has significantly reduced the amount of investment risk when 
those Government institutions are party to the loan consortia for a project. 7/ 
Such institutional arrangements are, in part, responsible for the low costs of 
capital to corporations in Japan. The average weighted cost of capital in 
1977 was 6.6 percent in Japan, compared with 9.4 percent in the United States, 
and in 1980, it was 8.5 percent in Japan and 13.1 percent in the United 


1/ MITI, Machine and Information Bureau, Trade and Industry Research Group, 
Commentary on Public Law 84, Semiconductor Industry Association Translation. 
2/ MITI, Japan. 

3/ Ibid. 

4/ Ibid. 

1/ Meeting; the Japanese Challenge . National Machine Tool Builders’ 
Association, McLean, Va., Sept. 14, 1981, pp. 17 and 18. 

6/ Ibid., p. 16. 

U Eisuke Sakakibara, Robert Feldman, and Yuzo Harada. The Japanese 
Financial System in Comparative Perspective. Joint Economic System in 
Comparative Perspective . Joint Economic Committee, U.S. Congress, Washington, 
D.C., Mar. 12, 1982, p. 21. 








53 


States. By the end of 1981, the average weighted cost of capital was 7.8 
percent in Japan and reached 16.2 percent in the United States. 1/ 

In the area of research and development, the Japanese Government is 
involved in providing grants and loans for projects, and tax subsidies to 
industry, as well as operating research and development facilities itself. 

The Agency for Industrial Science and Technology (AIST), directly under the 
MITI, administers research and development grants, including matching grants 
for specific projects. The large-scale research project also administers 
research and development grants, combining resources from industry and the 
Government. This has included a 7-year joint project to develop a 
laser-applied control system for machinery. 2/ This project, called Machines 
for Unmanned Manufacturing (MUM), involved three research institutes in the 
MITI and 20 manufacturers of materials, machine tools, and controls which were 
formed into an Engineering Research Association. Through the Subsidies for 
Important Technologies budget, subsidies are granted to small businesses for 
research and development. 3/ 

The AIST operates a number of research laboratories, including the 
Mechancial Engineering Laboratory (MEL) in Tokyo, and the Industrial Research 
Institutes in Osaka (materials) and Nagoya (forming processes). The research 
primarily benefits the industrial machinery sectors and has resulted in the 
first electrical discharge machines (EDM) in Japan and the introduction of the 
first direct numerical control (DNC) units. A/ Contacts between the 
Mechanical Engineering Laboratory and companies are not strong, and this is 
especially true for the smaller companies. 5/ 

The Japanese Government also influences research and development through 
taxes. In addition to the tax measure for research and development 
depreciation cited above, the Japanese Government allows tax credits for dues 
for establishing cooperative research associations among companies. 6/ 

Other sources of financing by the Government to the machine tool industry 
include Export-Import Bank loans and government-to-government credit in yen. 

The latter is frequently alleged to be ’’indirectly tied to machinery sales." 7/ 
The Overseas Economic Cooperation Fund, a public company under the direction 
of the Ministry of Finance, the Ministry of Foreign Affairs, and the Economic 
Planning Agency, arranges for large national projects purchased by foreign 
governments. Project financing falls under the heading of economic aid and is 


1/ Cabinet Council on Commerce and Trade, An Assessment of U.S. 
Competitiveness in High-Technolosy Industries. Appendices . May 19, 1982, p. 79. 
2/ I. Magaziner and T. Hout, Japanese Industrial Policy . 1980, p. 98 
3/ Ibid. 

A/ EDM machine technology was first pioneered and commericalized in 
Switzerland. Today there are three Japanese manufacturers of EDMs, who are 
major competitors to the Swiss counterparts. 

5/ George P. Sutton, "Trip Report on the Technology of Machine Tools in 
Japan," Visiting Team, Machine Tool Task Force . Lawrence Livermore National 
Laboratory, February 1980. 

6/ J. Magaziner and T. Hout, Japanese Industrial Policy , 1980, p. 99. 

7/ Ibid. 








5A 


therefore not regulated by the Organization for Economic Corporation and 
Development (OECD). 1/ The Overseas Economic Cooperation Fund is financed 
through the Government’s Fiscal Investment and Loan Program (FILP). 2/ 

The Japanese Government has also involved itself in the pricing of 
machine tools through the MITI. In December 1982, the MITI raised the U.S.- 
dollar-based export prices of NC lathes and machining centers made in Japan. 
This system of "floor prices" is based on a predetermined formula which 
includes the machine itself, machine weight, horsepower, workpiece capacity, 
and the country where purchased. The "floor price" system was implemented for 
NC lathes and machining centers exported to the United States and Canada in 
March 1978 and was expanded in January 1981 to include exports to the European 
Community. 3/ This "floor pricing" system is reviewed annually. 

The Japanese machine tool industry also received support from bicycle 
racing, sponsored by the Japan Keirin Association (also known as the Bicycle 
Rehabilitation Association (JBRA), and motorcycle racing, sponsored by the 
Japan Motorcycle Racing Organization. Grants from the proceeds of these 
activities are made to the JMTBA, but not to the Japan Metal Forming Machine 
Builders' Association. The JMTBA uses the racing proceeds to print 
literature, collect statistics, and hold trade shows. 4/ Bicycle-racing 
proceeds are also donated to the Technical Research Institute of the Japan 
Society for Promotion of Machine Industry (the institute reportedly represents 
other types of industrial machinery, rather than just machine tools). 5/ 
Estimates of the proceeds from the motorcycle-racing activities donated to the 
machinery industry are depicted in the tabulation below (in millions of 
dollars): 


Japanese Machinery 

Year JMTBA 1/ Industry 2/ 


1978 - .499 919 

1979 - .319 823 

1980 - .472 3/ 

1981 - .322 3/ 


1/ Comments on Foreign Industrial Targeting and Its Effects on U.S. 
Industries, United States International Trade Commission investigation No. 
332-162, submitted by Wender, Murase, and White, June 8, 1983, p. 5. 

2/ Statement of John Latona, Vice President of Law, Houdaille Industries, 
Inc., before the Joint Economic Committee of the U.S. Congress, hearing on the 
U.S. Machine Tool Industry and the Defense Industrial Base, June 7, 1983, p. 
10 . 

3/ Not available. 


1/ Ibid., p. 100 
2/ Ibid. 

3/ "MITI Boosts Prices of Japanese Machines," American Machinist . 
February 1983, p. 27. 

4/ Comments on Foreign Industrial Targeting and Its Effects on U.S. 
Industries, United States International Trade Commission investigation No. 
331-162, submitted by Wender, Murase, and White, June 8, 1983, p. 5. 

5/ Ibid. 












55 


The Japan Keirin Association also provided $1 million annually to the 
Technical Research Institute of the Japan Society for the Promotion of Machine 
Industry. 1/ 

In 1979, a temporary tariff was imposed on imports of machine tools 
ranging from 5 to 11 percent. Import duties of 7 to 10 percent were usually 
imposed on machine tool imports from countries adhering to the General 
Agreement on Tariffs and Trade (GATT). Higher tariffs, 12.5 to 15 percent, 
have been levied on some types of metal-cutting and metal-forming machines. 2/ 
Computerized numerical control units on machine tools in the recent past have 
on occasion been classified as computers, and the unit and machine tool were 
subject to a 17.5 percent duty. 3/ 


European Community 

The machine tool builders in the European Community (EC) A/ countries 
have traditionally produced sophisticated machines with a worldwide reputation 
for quality. In recent years, however, the share of total world production 
claimed by the EC industry has declined. In 1982, the EC share of world 
production was approximately 27.A percent, a decline from about 32.5 percent 
in 1977. 5/ The EC industry exported approximately 61 percent of its 
production in 1977, compared with 6A.7 percent in 1982. The EC countries have 
also been traditional trading partners with the CMEA (Council for Mutual 
Economic Assistance) countries of Eastern Europe. 

As a supranational governmental body, the EC has involved itself in 
promoting its industries. Since 1977, the EC has conducted a dialog with the 
Japanese with the goal of restoring a better balance of trade. According to 
the EC, one of the specific problems was H the Japanese tactic of waging an 
all-out export drive in a limited number of industries—notably cars, 
television sets, machine tools, and electronic goods.” 6/ During 1976-80, the 
EC market was penetrated by Japanese exports of machine tools, notably NC 
lathes and machining centers. In 1976, market penetration of Japanese NC 
lathes was 7.8 percent, by value, and 17.9 percent, by quantity, and for 
machining centers was 2.A and A.2 percent, respectively. By the end of 1980, 
penetration of Japanese NC lathes had increased to 18.7 percent, by value, and 
29.9 percent, by quantity, and for machining centers, penetration was 13.1 


1/ Comments on Foreign Industrial Targeting and Its Effects on U.S. 
Industries, United States International Trade Commission investigation No. 
331-162, submitted by Wender, Murase, and White, June 8, 1983, p. 5. 

2/ U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine Tools-Japan , U.S. CMS 79-A07, August 1979, p. 10. 

3/ U.S. General Accounting Office, United States-Japan Trade: Issues and 
Problems , Washington, D.C., Sept. 21, 1979, p. 120. 

A/ Excludes Austria, Sweden, and Switzerland, which are major producers of 
specialized machine tools. 

5/ American Machinist , February issues, 1979-82. Production figures are for 
France, Italy, Belgium, Denmark, the Netherlands, United Kingdom, and West 
Germany. 

6/ Commission of the European Communities, Bulletin of the European 
Communities Commission, No. 2, vol. 16, 1983, p. 81. 










56 


and 35.9 percent, respectively. 1/ During 1976-80, EC production of machining 
centers and NC lathes was dramatically surpassed by that of the Japanese. By 
1980, EC production totaled 6,319 units, but Japanese production amounted to 
17,267 units'. 2/ In early 1983, the EC, through ministerial talks, 
successfully negotiated with the Japanese a continuation of the moderation, 
introduced in 1982, of exports to the EC of 10 sensitive products, including 
numerically controlled machine tools. 3/ However, this was partly the result 
of efforts begun in March 1982, when EC Council delineated a comprehensive 
common strategy to restore the balance of trade, including "(c) 
acknowledgement of the need to complete a Community policy which would enable 
European firms to develop positive strategies to meet Japanese competition." 4/ 
In late December 1982, the EC Council reported that, "As regards the 
moderation of Japan’s exports of 10 sensitive products, the Commission 
considered it had obtained from the Japanese authorities the assurance called 
for by the Council on 13 December that a policy of clearly defined and 
effective moderation towards the Community as a whole would be pursued." 5/ 
Regarding the success of the machine tool industry in Japan, the European 
Council's view was that this was due to " . . . intervention by the [Japanese] 
public authorities in all its many forms, the successful integration of the 
electronics and mechanical-engineering industries and the vigorous efforts to 
stimulate demand. . ." 6/ On February 11, 1983, the European Commission sent 
to the European Council its comments on the machine tool industry and a 
document dealing with the situation and prospects. The report outlined an 
operational program consisting of Commission actions to be undertaken in the 
areas of revival of investment, matching supply to demand, structural 
adjustments, social aspects of the industrial transformation, the diffusion of 
advanced technologies, and trade (app. H). 

The actions the EC undertook in encouraging the spread of advanced 
technology included the stimulation of NC production; standardization of 
interfaces between machines, control systems, and operators; coordinating the 
needs of the machine tool industry with other EC programs on data processing, 
microelectronics, fundamental technological research and Esprit (a European- 
wide, cooperative program among companies and organizations performing basic 
research, including electronics and computer firms); and coordination among 
machine tool research organizations in both the public and private sectors. 7/ 
In the area of finance, the EC’s financial instruments, the European 
Investment Bank (EIB) and New Community Instrument (NCI), will permit EC 


1/ Commission of the European Communities, The European Machine Tool 
Industry. Commission Statement. Situation and Prospects , sec. (83) 151 Final, 
Brussels, Belgium, Feb. 8, 1983, Annex 13. Share of penetration calculated in 
nominal dollars. 

2/ Ibid., p. 1. 

3/ Commission of the European Communities, Bulletin of the European 
Communities Commission . No. 2, vol. 16, 1983, p. 9. 

4/ Ibid., pp. 8-9. 

5/ Ibid., p. 9 

6/ Ibid., p. 19. 

l_/ Commission of the European Communities, The European Machine Tool 
Industry. Commission Statement. Situation and Prospects , sec. (83) 151 Final, 
Brussels, Belgium, Feb. 8, 1983, pp. 10-11. 









57 


machine tool firms to have adequate access to financial resources. 1/ The EC 
Commission has allocated $1.2 million for the European Committee for 
Cooperation of Machine Tool Industries (CECIMO) 2/ to conduct a market survey 
with the goal of directing the European Community's machine tool firms toward 
becoming more competitive. 3/ Another action to be taken by the Commission in 
this program is the standardization of customer specifications for the machine 
tool industry, such as by the aerospace and motor industries. 4/ 

The following industry profiles describe the major producers of 
metalworking machine tools in the EC, namely, West Germany, Italy, the United 
Kingdom, and France, and Government actions in these countries involving the 
machine tool industry. 


West Germany 

Industry .—Currently, the West German machine tool sector is made up of 
440 establishments, 328 of which are members of the German Machine Tool 
Builders’ Association, accounting for 80 percent of German machine tool 
sales. 5/ In 1977, according to CECIMO estimates, there were 460 firms in the 
industry. During 1978-80, the industry had approximately 450 firms. 6/ In 
contrast, in 1976, the machine tool industry in West Germany was composed of 
965 firms. This included 13 U.S. subsidiaries and 20 subsidiaries of other 
foreign companies. There were 20 firms each employing over 1,000 persons, 185 
firms each employing between 100 to 1,000 persons, and 760 firms each 
employing less than 100 persons. Domestically owned firms together accounted 
for 96 percent of total sales, with foreign subsidiaries accounting for the 
remaining 4 percent. 7/ In 1976, several companies closed or merged with 
others. 8/ In 1977, Pittler, a major manufacturer, received a substantial 


1/ Ibid., pp. 5 and 6. 

2/ Comite European de Cooperation des Industries de la Machine-Outil 
(CECIMO), an association which represents machine tool builders in Austria, 
Belgium, Denmark, France, West Germany, Italy, the Netherlands, Portugal, 
Spain, Sweden, Switzerland, and the United Kingdom. 

3/ Commission of the European Communities, The European Machine Tool 
Industry. Commission Statement. Situation and Prospects , sec. (83) 151 Final, 
Brussels, Belgium, Feb. 8, 1983, p. 12. 

4/ Ibid. 

5/ Comments of the German Machine Tool Manufacturers' Association before the 
Secretary of Commerce in the matter of National Security Investigation Under 
Section 232 of the Trade Expansion Act of 1962 (19 U.S.C. 1862), Barnes, 
Richardson & Colburn and the German Machine Tool Builders’ Association, 
Washington, D.C. June 1, 1983, p. 8. 

6/ CECIMO. 

7/ U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine Tools-West Germany , CM 79-403, June 1979, p. 6. 
Differences in figures for 1976 and 1977 may be accounted for by various data 
sources used by the Department of Commerce and CECIMO. 

8/ Anderson Ashburn, "World Machine-Tool Output Down", American Machinist . 
February 1977, p. 107. 










58 


infusion of capital from two banks which were primary shareholders, thus 
preventing the firm’s bankruptcy. 1/ 

The West German machine tool industry employed 94,000 persons in 1982, 
decreasing from 99,000 persons in both 1980 and 1981. In 1981, the West 
German machine tool industry employed an estimated 225 workers per firm. 
However, employment did increase to 101,000 in 1979 from 98,700 persons in 
1978. 2/ The composition of the workforce as of the end of December 1982 was 
39 percent, white collar workers; 42 percent, skilled workers; 8 percent, 
apprentices; and 11 percent, all other workers. Foreign nationals constituted 
7 percent of the workforce. 3/ 

In 1982, West German machine tool production was valued at approximately 
$3.5 billion, down from $4.7 billion in 1980. Production totaled $2.6 billion 
in 1977. 4/ Exports were valued at $2.3 billion in 1982, decreasing from 
$2.9 billion in 1980. Exports totaled $1.8 billion in 1977. Imports 
decreased to $514.5 million in 1982 from $802.1 million in 1980. Imports 
totaled $320.4 million in 1977. Consumption followed the same pattern as that 
of production, exports, and imports, decreasing to $1.7 billion in 1982 from a 
high of $2.5 billion in 1980 and, in 1977 totaled $1.1 billion. 

Exports as a share of production increased gradually to about 66 percent 
in 1982 from 63 percent in 1978. However, in 1977, exports accounted for 69 
percent of production. Imports as a share of consumption decreased to about 
30 percent in 1982, from 31 percent in 1980. Imports as a share of 
consumption decreased to 9 percent in 1979 from 28 percent in 1977. 

The West German ratio of metal-cutting to metal-forming machine tool 
production (based on value) remained stable during 1977-82, at approximately 
2.3 to 1. 

In early 1982, capacity utilization among members of the German Machine 
Tool Manufacturers* Association (VDW) averaged 80 percent, but declined to 77 
percent by the end of the year. In order for a machine tool manufacturer to 
break even, an 85-percent capacity utilization rate is customary. 5/ 

The Association of Industrial Research Groups (AIF), a nonprofit 
organization, consisting of the German Machine Tool Manufacturers’ 

Association, the West German Government, and universities, compose a large 
consortium to conduct research. 6/ The AIF’s corporate members cover 60 
percent of the country’s industrial production. 


1/ Anderson Ashburn, ’’World Machine-Tool Output Up Slightly”, American 
Machinist . February 1978, p. 84, 

2/ CECIMO. 

3/ German Machine Tool Builders’ Association. 

4/ Figures for production, exports, imports, and consumption are from 
American Machinist . February issues, 1979-83. 

5/ ’’Exports of German Tools to U.S. Off 0.7% in 82,” American Metal Market , 
vol. 91, No. 60, Mar. 28, 1983, p. 8. 

6/ The Competitive Status of the U.S. Machine Tool Industry: A Study of the 

Influence of Technology in Determining International Industrial Competitive 

Advantage. National Academy Press, Washington, D.C., 1983, p. 33. 










59 


Government involvement .—In 1972, the Ministry of Research and Technology 
(Bundesministerium fur Forschung and Technologie (BMFT)) was created to 
organize and bring efficiency to industries in decline, and to promote 
"knowledge-intensive" businesses. The Government granted funds directed 
especially toward those knowledge-intensive industries that are export 
oriented. It appears that only marginal results were achieved by research and 
development in the mechanical area through the traditional industry and 
university ties, especially for small machine tool businesses. 1/ In 1979, 
the BMFT granted 94 percent of its budget to companies which had a turnover of 
more than $110 million. 2/ Many major machine tool manufacturers were 
excluded from receiving these research and development funds. In 1979, the 
Ministry of Economics gave grants totaling approximately $176 million to 4,600 
small companies for ’’personnel improvement,” averaging about $38,500 per 
company, or 13 percent of total annual personnel costs. Many West German 
machine tool companies received grants from this program. 3/ 

It is not known to what extent the Lander (the collection of political 
units of Government, except the Federal Government, such as cities, school 
boards, States, and similar organizations) assists the machine tool industry 
or individual companies. It is known that the Lander does assist businesses 
in order to improve local employment opportunities. 4/ 

The West German Government participates in the financing of exports 
through a number of organizations—Banks with Special Functions, the Hermes 
Corp. (official Government capital aid to foreign countries), and the Deutsche 
Bank (Central), which heads the traditional banking network. 

Banks with Special Functions include the Ausfuhrkredit-GmbH (AKA), the 
Export Credit Bank, the Kreditanetalt fur Wiederaufbau (Reconstruction Loan 
Corp.), the Industrie-kreditbank AG, and the Berliner Industrie-bank AG. The 
AKA is composed of member banks and basically underwrites ’’any worthy export 
product or service." 5/ The Kreditanstalt fur Wiederaufbau, which finances 
overseas development projects, is 80-percent owned by the West German 
Government and 20-percent owned by the States of West Germany. The Foundation 
to Promote Research for Trade and Industry owns approximately 28 percent of 
the Industrie-kreditbank AG’s stock, with the remainder owned by major banks, 
insurance companies, and small investors. The West German Government owns the 
Berliner Industriebank AG and provides tax writeoffs for those investing in 
the bank. 

The Hermes Corp. is a public corporation owned and operated by the 
Ministry of Economics on the Government’s behalf. The corporation offers 
guarantees for exports of products produced by West German companies. A 
Hermes* guarantee allows an exporter to receive preferential financing rates 
from special-function banks or private sector banks. 

1/ The Case for Specialized Productivity Programs in Support of Basic 
Industries’ in the National Interest, Case II; Machine Tool Industry . Bedell 
Associates, Washington, D.C., December 1980, p. 47. 

2/ Ibid., p. 48. 

3/ The Case for Specialized Productivity Programs in Support of Basic 
Industries in the National Interest, Case II: Machine Tool Industry . Bedell 
Associates, Washington, D.C., December 1980, p. 48. 

4/ Ibid., p. 49. 

5/ Ibid., p. 36. 








60 


In early 1977, West German Government research-funding policy was 
established to support activities where scientific, technical, and economic 
risks were high, when a large expenditure of funds was required, or for long¬ 
term projects generating marginal profits in the projects' early stages. 1/ 
Research funding came from both the West German Federal Government and the 
State governments. The BMFT was instrumental in actively promoting 
knowledge-intensive industries with export orientation and supported other 
nonuniversity activities; the State governments supported programs in the 
universities. 2/ In 1977, the Gesellschatt fur Kerntechnik (GFK) and the 
Deutsche Forschungs- und Versuchsanstalt fur Luft- und Raumfahrt (DFVLR) were 
leading research centers in the areas of advanced manufacturing technology and 
automation. The two centers together employed 5,600 scientists, with 
employment totaling 17,000 persons. The GFK research center coordinated 
projects in Process Control by Computer (PDV) and CAD. In the CAD program, a 
participating institute received 100-percent funding; other firms received 50- 
percent funding for their projects. The DFVLR had two programs directed 
towards FMS technology: humanization of the work environment; and advanced 
manufacturing technology (P&F). The DFVLR also investigated industrial 
robots, FMS research and development, and pattern recognition. 

The German Research Society (DFG), a nonprofit, selfgoverning 
organization including universities and technical colleges, was organized to 
avoid duplication of research efforts and to disseminate research results. 

The DFG initiated research activities among different organizations, 
especially at universities. Research in manufacturing was established at 
Universities in Aachen, Berlin, and Stuttgart. The "Hochschulgruppe 
Fertigungstechnik" (HGF), an informal organization consisting of 16 chaired 
professors in the area of production engineering and manufacturing technology 
with 500 research assistants, 600 part-time student assistants, and 230 
support personnel, was "the most important influence on manufacturing 
research." 3/ 

In 1968, the Technical University of Aachen was designated a special 
research area for manufacturing technology. In 1977, the Laboratory for 
Machine Tools and Production (WZL) at the Technical University of Aachen 
conducted research in the areas of production engineering, production 
processes technology, machine tools, measurement technology, and automated 
production. Other projects at Aachen included the areas of CAD/CAM and FMS. 
The Laboratory employed three chaired professors and a staff of 400 persons. 
Another major research laboratory in 1977 was the Institute for Machine Tools 
and Manufacturing Technology (IWF). The Institute, which employed 150 
persons, was divided into the Machine Tool Group, the Programming Group, and 


1/ G.K. Hutchinson, Flexible Manufacturing. Systems in the Federal Republic 
of Germany (BRD) . Management Research Center, the University of Wisconsin- 
Milwaukee, December 1977, p. 1. 

2/ " The Case for Specialized Productivity Programs in Support of Basic 
Industries in the National Interest. Case II: Machine Tool Industry ." Bedell 
Associates, December, 1980. 

3/ G.K. Hutchinson, op. cit., p. 5. 







61 


the Control Group. The Control Group conducted research on control systems, 
robotics, and flexible manufacturing systems. The University of Berlin joined 
in a cooperative venture with Zahrahfabrik Friedrichschafen, a gear 
manufacturer, to develop an FMS for the early 1980’s. 1/ Another venture 
between IWF and an industrial machine tool builder involved the development of 
a Flexible Manufacturing Cell (FMC). 2/ In 1977, the research program in 
industrial manufacturing systems at the University of Stuttgart was conducted 
through the Institute for Machine Tool Control Systems, the Institute for 
Production and Automation, and the Institute for Machine Tools. The 
University of Stuttgart was also designated as a special research area of the 
German Research Society. 


Italy 


Industry .—By early 1983, the number of firms manufacturing machine tools 
in Italy totaled 450. 3/ Employment in these firms is as follows: 40.9 
percent of the firms employed from 0 to 20 workers; 27.7 percent employed from 
30 to 50 workers; 20.8 percent employed from 50 to 150 workers; 7.1 percent 
employed from 150 to 300 workers; 1.4 percent employed from 300 to 500 
workers; and 2.1 percent employed more than 500 workers. 4/ In 1981, 
according to CECIMO estimates, there were approximately 430 firms in the 
industry, decreasing from 450 firms in 1978, 1979, and 1980. In 1977, there 
were 480 firms, of which 1 was a U.S. subsidary, and 2 were subsidiaries of 
other foreign companies. 5V The majority of machine tool manufacturers (256 
firms) each employed less than 99 persons; 74 firms each employed between 100 
and 499 persons; and 5 firms employed over 500 persons. 6/ 

The Association of Italian Machine Tool Builders (UCIMU), which 
represents the Italian machine tool industry, had 150 members by the end of 
1982, of which it is estimated 25 went into bankruptcy proceedings and were 
not producing machine tools. 7/ Of the 25 firms in bankruptcy proceedings, 5 
were large firms employing over 600 persons each. 8/ One large firm which 
went into the Italian equivalent of Chapter 11 proceedings was the family 
owned firm Canavese Sri. During 1977-82, family ownership of machine-tool¬ 
manufacturing companies continued to be the dominant pattern in the industry. 
Frequently, a company’s owner is also an engineer who designs many of the 
products himself. 

The subcontracting approach is widespread in the machine tool industry 
and came about as a way to mitigate the impact of Italian labor unions, 


1/ Ibid., p. 10. 

2/ Ibid., p. 11. 

3/ U.S. Department of State Telegram, U.S. Embassy, Rome, Italy, Mar. 3, 
1983. 

4/ Ibid. 

5/ CECIMO and U.S. Department of Commerce. 

6/ U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine Tools-Italy . Washington, D.C. CMS 70-413, Nov. 1979, 
p. 7. 

7/ Telephone interview with David Wolstenhome, machine tool consultant, 
Italian Institute of Foreign Trade, June 2, 1983. 

8/ Ibid. 







62 


specifically, union resistance to automation technologies and labor laws which 
restrict overtime and layoffs. Italian companies in the industry are turning 
towards purchasing basic parts, which can be produced cheaper by outside 
suppliers, and then assembling the components. As a spokesman for UCIMU 
described this trend, ’’you have suppliers who are buying finished machine 
tools to make parts for other machine tools, for the people from whom they 
bought the original equipment.” 1/ 

The Italian machine tool industry is quite decentralized, allowing for 
flexibility in responding to changes in the marketplace. For example, in 
April 1980, Graziano & Co SpA, a major machine tool builder specializing in 
lathes, entered into a 50/50 joint venture with Jobs SpA, Piacenza, forming a 
new firm called Quota to combine machining centers with robot manipulators. 2/ 
However, in autumn of 1982, when Graziano & Co SpA, began having financial 
troubles, Jobs SpA pulled out of its joint venture and sold the product line 
to Olivetti. 3/ 

Italian firms have also formed joint ventures with foreign firms. In 
1972, SAIMP began producing machining centers with Forest, a French builder, 
and the relationship was continuing as of the end of 1980. 4/ In mid-1982, 
Allen-Bradley (U.S.) and Olivetti Sistemi per 1'Automazione Industriale (OSAI) 
agreed on a joint venture to merge Allen-Bradley’s European operation with 
OSAI, forming a new firm to market numerical controls. OSAI received an 
infusion of capital, and Allen-Bradley acquired options on the manufacture of 
OSAI equipment in the United States and servicing of equipment by OSAI. 5/ In 
early 1983, Bendix Corp. established a joint venture with Comau SpA, a 
subsidiary of Fiat SpA, to build in the United States production systems, 
stand-alone machines such as turning, grinding, and chucking machines, and 
nonmachine tool products which were produced by Comau SpA. Comau gained 
access to market other systems and equipment not covered in the agreement, 
such as machining systems, boring machines, boring and turning mills, and 
chuckers—many of which are CNC machines—through the joint venture's new 
organization. 6/ 

UCIMU, the industry association which represents the Italian machine tool 
builders, has taken an active role in supporting the industry. UCIMU offers 
its members export-marketing services, as well as other services. CEU, an arm 
of UCIMU, sponsors machine tool exhibitions. In the autumn of 1980, UCIMU was 
attempting to encourage the standardization of certain components. 7/ In 


1/ Rupert Cornwall, ’’Producers Plead for Government Aid”, Financial Times: 
Financial Times Survey—Italian Engineering . June 25, 1983, p. VI. 

2/ "Tool Pushcart Rolls to New Machining Center”, American Machinist . 
December 1980, p. A5. 

3/ ’’More Untended Chip-Making Machines”, American Machinist . November 1982, 
p. 57 . 

4/ ’’Tool Pushcart Rolls to New Machining Center”, American Machinist . 
December 1980, p. 45. 

5/ ’’Allen-Bradley’s Olivetti Door to NC in Europe,” American Machinist . June 
1982, pp. 44-48. 

6/ ’’Bendix in Pact with Fiat on Comau Venture,” American Metal Market . Jan. 
24, 1983, pp. 1, 14. 

7/ ’’Italy Boosts Machine-Tool Exports,” American Machinist . October 1980, 
p. 57. 











63 


1980, UCIMU established UCIMU of America, Inc., with an office in McLean, Va., 
to coordinate the imports of Italian machine tool builders into the United 
States by performing market analysis and locating dealer networks. The office 
currently acts solely as an information bureau for UCIMU. 

FINCIMU (Finanziaria Costruttori Italiani Macchine Utensili SpA), 
established in 1973 as a subsidiary of UCIMU, specializes in arranging 
financing and intermediary services strictly for the machine tool industry. 

In early 1983, FINCIMU had 4 to 5 billion lire in capital (approximately $2.9 
to $3.6 million at 1st quarter 1983 exchange-rates), 50 member firms, and a 25 
person staff. 1/ FINCIMU does not provide preferential credit; rather, it 
pays the prime rate. 2/ The company provides "easier, faster access to credit 
when speed counts in competing for contracts," especially when a producer 
needs financing from the beginning to the end of an order which may take years 
to fill. 3/ 

By the end of 1982, employment in the Italian machine tool industry 
totaled 33,800, of which approximately 23,000 were production workers. 4/ In 

1981, employment was 36,000 persons with an estimated 84 workers employed per 
firm. In 1980, employment was 37,200, an increase from 36,500 in 1977. 

By the end of 1982, Italian machine tool production was valued at 
$1.25 billion. 5/ Production declined in 1981 to $1.51 billion from $1.73 
billion in 1980. Production grew steadily to $1.35 billion in 1979 from 
$878.3 million in 1977. Italian exports, imports, and consumption followed 
the same pattern as production, reaching a peak in 1980. In 1982, exports 
were valued at $749 million, a decrease from $847.7 million in 1980. Exports 
grew to $689 million in 1979 from $436.5 million in 1977. Imports totaled 
$221.4 million in 1982, having peaked in 1980 at $379.7 million. Imports 
increased to $255.9 million in 1979 from $187.7 million in 1977. Consumption 
was valued at $726.9 million in 1982, representing a decrease from $1.26 
billion in 1980. Consumption grew steadily through 1980 from $629.5 million 
in 1977. 

In 1982, exports as a share of production were approximately 60 percent. 
In 1980, exports as a share of production were approximately 49 percent, 
decreasing from 56 percent in 1978, but were 50 percent in 1977. In contrast, 
the ratio of imports to consumption was fairly stable, ranging from about 28 
to 30 percent during 1977-82. During the same period, the ratio of production 
of metal-cutting to metal-forming machines was also fairly stable. In 1982, 
the ratio was 2.1:1, however, in 1977 the ratio was 1.9:1, based on production 
value. 


1/ "Italy’s Captive Machine Financier," American Machinist . March 1983, 
p. 39. 

2/ Ibid. 

3/ Ibid. 

4/ U.S. Department of State Telegram, U.S. Embassy, Rome, Italy, Mar. 3, 
1983. 

5/ Figures for production, exports, imports, and consumption from American 
Machinist, February issues, 1979-83. 






64 


Government involvement .—Italian government involvement in the country's 
machine tool industry dates back to at least 1965 with the enactment of the 
Sabatini Law. 1/ The law provides for a system of deferred payments of up to 
5 years for the purchase of machine tools. In addition, the seller receives 
the benefit of being able to discount the bills in medium-term credit 
establishments. An interest rebate may be applied to the financing. 

Currently, the law is used to stimulate capital investment in the Italian 
economy. The law applies to purchases of any industrial equipment regardless 
of origin and is designed to benefit domestic purchasers. Under the law, 
financing is provided at a low rate, currently 9 percent annually, with an 
initial payment of 15 percent required on all equipment purchases. Also, the 
seller must guarantee the financing. If the purchaser does not repay the loan 
for any reason, the seller is responsible for assuming the loan. Currently, 
because of this guarantee, a number of Italian machine tool firms are paying 
outstanding balances on debtors' loans. 2/ 

In mid-June 1982, the Italian machine tool builders lobbied the 
Government to be included the Government’s $1.17 billion program for 
technological innovation. 3/ Other industry efforts focused upon developing 
Government aid for stimulating machine tool purchases. 4/ 

The Italian Government maintains research ties with the machine tool 
builders in Italy. The Italian National Council of Research has established a 
manufacturing research program at several Italian universities in which 
industry also participates. 5/ Also, the IMI, a financial agency, sponsors 
research projects on manufacturing through low-interest loans and grants from 
the Government. The IMI especially tries to promote the occurrence of the 
research projects in small- and medium-sized companies. 6/ 


1/ Legge 28 Novembre 1965, n. 1329. Prowedimenti per l’acquisto di nuove 
macchine utensili. Gazzetta Ufficiale Della Republica Italiana . No. 311, Dec. 
14, 1965, pp. 6255-6258. 

2/ Staff telephone interview with David Wolstenhome, machine tool 
Consultant, Italian Institute of Foreign Trade, Aug. 31, 1983. 

3/ Rupert Cornwall, "Producers Plead for Government Aid", Financial Times : 
Financial Times Survey—Italian Engineering, June 25, 1983, p. VI. 

4/ Ibid. 

5/ The Competitive Status of the U.S. Machine Tool Industry: A Study of the 

Influences of Technology in Determining; International Industrial Competitive 

Advantage, National Academy Press, Washington, D.C., 1983, p. 35. 

6/ Ibid. 









65 


United Kingdom 

Industry .—In both 1980 and 1981, there were approximately 200 firms 
producing machine tools in the United Kingdom according to CECIMO estimates. 1/ 
Based on 1980 data from the United Kingdom’s Industial Census , machine tool 
firms with a workforce of over 1,000 accounted for 1.7 percent of all firms, 
25.8 percent of all employees, and 25.5 percent of production. 2/ In 
contrast, in 1976, there were 165 firms in the United Kingdom manufacturing 
machine tools, of which 45 firms were U.S. subsidiaries, and 31 firms were 
subsidiaries of other foreign operations. Total employment in the industry 
was 53,891, with 11 firms each employing 1 to 99 persons, 104 firms each 
employing 100 to 999 persons, and 50 firms each employing over 1,000 
persons. 3/ 

In 1982, machine tool production in the United Kingdom totaled 
$735.5 million, declining from approximately $1.4 billion in 1980. 4/ 

Production totaled $587.9 million in 1977. Exports were valued at 
$490.3 million in 1982, declining from $674.6 million in 1980. Exports were 
valued at $300.4 million in 1977. Imports totaled $385.2 million in 1982. 
During 1977-82, imports peaked at $623.4 million in 1980, increasing from 
$238.3 million in 1977. Consumption in 1982 was valued at $630.4 million. In 
1980, consumption totaled $1.34 billion, increasing from $525.8 million in 
1977 . 

Machine tool exports as a share of production stood at 67 percent in 
1982, increasing from 48 percent in 1980 and 47 percent in 1979. In 1977, 
exports as a share of production were 51 percent. Imports as a share of 
consumption increased to 61 percent in 1982 from 45 percent in 1977. During 
1981-82, the share registered its largest gain of 9 percentage points, 
increasing from 52 percent in 1981. The ratio of metal-cutting to 
metal-forming machine tool production (based on value) increased gradually to 
about 6:1 in 1982 from 3.7:1 in 1977. 

In 1982, employment in the United Kingdom machine tool industry declined 
to 39,300 persons from 43,400 in 1981. In 1981, the United Kingdom’s machine 
tool industry employed an estimated 217 per firm. The greatest reductions in 
the workforce occurred in 1979 and 1980, from 51,000 in 1979 to 45,000 in 
1980. 5/ In 1977, the industry employed 52,000 persons. 

By 1979, the machine tool industry was not able to meet the needs of 
sophisticated end users, because the industry had neither maintained capital 
investment for modernizing the production process nor introduced new products 


1/ CECIMO. 

2/Commission of the European Communities, The European Machine Tool 
Industry. Commission Statement. Situation and Prospect , Sec. (83) 151 Final, 
Brussels, Belgium Feb. 8, 1983, Annex 3 and Annex 8. 

3/ U.S. Department of Commerce Industry and Trade Administration, Country 
Market Survey: Machine Tools United Kingdom ,CMS 79-411, September 1979, p. 4. 

4/ Figures for production, exports, imports, and consumption are from 
American Machinist , February issues, 1979-83. 

5/ Statistics are from CECIMO. 











66 


embodying higher technologies. 1/ This was reflected in the unit prices of 
machine tools, which averaged $10,173 for imports and $7,294 for exports 
during January-September 1978. 2/ 

Government involvement .—In 1975, the Government of the United Kingdom 
provided $54 million to the machine tool industry for the purpose of improving 
production and introducing products embodying higher technologies. Some $360 
million in new capital investment was generated in the process. 3/ In April 
1983, as part of the proposed Department of Industry’s support for the 
information technology program, the Department committed $1.83 million to 
flexible manufacturing systems (FMS) out of approximately $91.9 million 
available. 4/ 

The United Kingdom Government provides a number of services and support 
programs to the whole of the country’s industry. These include technical 
advice, information and services, support for innovation, assistance for 
investment or restructuring, export services, and regional assistance from 
both the British Government and the European Community. The Department of 
Industry's program of support for information technology includes several 
areas pertinent to the development of machine tool technology. These include 
microelectronics industry support program (MISP), microelectronics application 
program (MAP), computer-aided-design/computer-aided-manufacture (CAD/CAM), 
computer-aided-design/manufacture and testing (CAD/MAT), hardware for 
(CAD/CAM/MAT), flexible manufacturing systems (FMS), robotics, and software. 
Approximately $310 million was allocated by the Department of Industry to the 
above areas during May 1982-May 1983. 5/ Information technology research and 
development is also funded by the Department of Education and Science 
(approximately $150 million during May 1982-May 1983) and the Ministry of 
Defense, for which estimates are not available. 6/ Another Government program 
likely to benefit the United Kingdom machine tool industry is the Small 
Engineering Firms Investment Scheme 2 (SEFIS 2), one of several programs to 
aid small firms. 

In the area of technical advice information and services, there is the 
manufacturing advisory service, the goals of which are to promote efficiency 
in small- and medium-sized firms and to encourage firms to seek outside 
technical assistance. These services are designed for firms employing 60 to 
1,000 persons and include, at no cost: 15 man-days of consulting services 
regarding organizational and manufacturing techniques; a further 15 man-day 
period of assistance, with the company paying half the cost; and limited 
training assistance. 77 


1/ Department of Commerce, Industry and Trade Administration, Country Market 
Survey: Machine Tools-United Kingdom . CMS 79-411, September 1979, p. 4. 

2/ Hazel Duffy, ’’Machine Tool Exports Up By Nearly 30 percent,” Financial 
Times, Jan. 6, 1981, p. 8. 

3/ U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine Tools-United Kingdom . CMS 79-411, September 1979, p. 4. 

4/ Alan Cane, ’’Britain Enters the Great Race," Financial Times . May 9, 1983, 
p. 14. 

5/ Alan Cane, ’’Britain Enters the Great Race,” Financial Times . May 9, 1983, 
p. 14. 

6/ Ibid. 

7/ "Guide to Industrial Support,” British Business . Mar. 25, 1983, p. 10. 













67 


In support of the innovation area, several United Kingdom programs 
potentially may enhance United Kingdom machine tool competition. These 
include CAD/CAM, CADMAT, computer-aided design and testing equipment (CADTES), 
flexible manufacturing systems, microelectronics application projects, 
microelectronics industry support programs, software products schemes, and 
industrial robots. 

The Department of Industry (DOI) has five research and development 
requirements boards in the department to provide advice concerning DOI's 
support for research and development. These are textiles and other 
manufactures; electronics and avionics; materials, chemicals, and vehicles; 
advanced manufacturing technology (formerly mechanical and electrical 
engineering); and metrology and standards. 1/ The DOI awards grants toward 
the costs of eligible projects. Currently, the maximum level of a grant is 25 
percent of the qualifying costs; however, for company applications received by 
May 31, 1984, and claims for incurred expenditures received by May 31, 1987, 
the maximum level of the grant is 33-1/3 percent, with the company paying the 
remainder of the costs. The DOI can also negotiate a shared-cost contract in 
which the Department contributes up to ”50 percent of qualifying costs 
recoverable by a levy on commercial sales.” 2/ The DOI will also subsidize a 
’’pre-production order,” where a user, on a trial basis, can take delivery of 
those products embodying new technology, prior to actual purchase. Expenditure 
limits for such individual projects usually range from approximately $37,500 
to $7.5 million. 

The SEFIS program is currently in its second phase (SEFIS 2), and in 
March 1983, was allocated 100 million pounds (US $153.2 million). 3/ The 
program’s objective is to assist small firms in the purchase of certain types 
of technologically advanced capital equipment. 4/ The first phase of the 
program began in March 1982, and its 30-million-pound allocation was committed 
in just 8.5 weeks. The second phase of the program provides Government grants 
of up to 33.3 percent for investments, regardless of the country of origin. 

Also included in the second phase are machine shops employing up to 500 
persons. 5/ Companies participating in SEFIS 2 also receive from the Scottish 
Government a land development grant of 25 to 26 percent of the purchase 
price. 6/ 

Under the United Kingdom’s program of support for innovation, the 
application of flexible manufacturing systems is promoted. DOI will provide 
up to 50 percent support, with a maximum grant of about $75,000, toward the 
cost of consultant feasibility studies. For FMS installation, up to 33-1/3 
percent of the grant may be applied toward development costs and capital 
expenditures. A qualifying FMS project requires a minimum expenditure of 


1/ Ibid., p. 13. 

2/ Ibid. 

3/ Industrial Support Guide in British Business Mar. 25, 1983 p. 28. See 
also ”UK Pushes Aid Plan For Small Companies,” American Metal Market , May 16, 
1983, p. 15. 

4/ Ibid. 

5/ Sam L. Jones, ’’Automatic EDM Ready for US Push: Swiss Execs,” American 
Metal Market , June 20, 1983, p. 12. 

6/ Ibid. 







68 


$300,000, with no expenditure ceiling or time limit. Projects involving the 
industrial application and manufacture of robotic devices generally receive 
the same types of assistance as that given to FMS projects; however, the 
maximum grant for feasibility studies is about $4,500, and the normal minimum 
amount for project expenditures is about $37,500. 1/ Under the FMS program, 
second-hand equipment is not eligible for assistance. 2/ 

Among the DOI’s research facilities, the National Engineering Laboratory 
(NEL) conducts research for mechanical engineering, development design, 
testing, and consulting activities. Its activities include the areas of 
robotics, FMS, and CAD/CAM. 

The European regional development fund provides aid for consultancy and 
services relating to technological innovation and information and access to 
risk capital. Regional development grants are also made available for the 
rental and sale of factories, warehouses, offices, and land. United Kingdom 
firms may obtain loans through the European Investment Bank (EIB) for 
investment in manufacturing, industry-related services, and tourism projects. 

Up to 50 percent of the fixed capital investment costs in projects can be 
provided for by fixed-interest loans from the EIB. Qualifying projects are 
limited to companies employing less than 500 persons, and projects must cost 
over $22,500, with a time limit of 8 years. 

Like many other major industrialized countries, the British Government 
does provide export services. The Exports Credits Guarantee Department, 
directly under the Secretary of State for Trade, provides insurance to 
exporters against possible nonpayment by foreign countries, and it also 
provides guarantees to banks so exporters can obtain financing, often at 
favorable rates. Other services by the Exports Credits Guarantee Department 
are lines of credit, consortium insurance for United Kingdom consortium 
members in major overseas projects, bond guarantees for export contracts on 
cash or near cash terms, cost-escalation protection against United Kingdom 
cost increases, external-trade guarantees for the risk of nonpayment of goods 
in overseas transit, and interest on new United Kingdom private, overseas 
investment. 3/ 

By May 1983, the DOI had committed $52.5 million for the development and 
procurement of flexible manufacturing systems by industry in its FMS program 
under support for innovation. 4/ Since June 1982, when the program was 
established, some degree of consideration has been provided to 50 projects. 5/ 
Approximately $12 million of FMS program funds have been allocated for 
supporting robotics. 6/ Under the Science and Technology Act, $37.5 million 
in aid has been allocated for projects entailing high risk in the FMS field. 7/ 


1/ "Guide to Industrial Support,” British Business . Mar. 25, 1983, p. 13. 

2/ "Flexible Manufacturing: One Way to Keep Ahead of the Competition," 
British Business , June 3, 1983, p. 390. 

3/ "Guide to Industrial Support," British Business . Mar. 25, 1983, p. 24. 

4/ David Krammer, "New Technology Urged for Britain," American Metal Market . 
May 2, 1983, p. 19. See also David Krammer, "British Group Builds FMS," 
American Metal Market . Dec. 13, 1982, p. 8. 

5/ David Krammer, "New Technology Urged for Britain," American Metal Market . 
May 2, 1983, p. 19. 

6/ Ibid. 

7/ Ibid. 









69 


Prior to the establishment of the DOI’s FMS program, the United Kingdom 
Government provided assistance to several FMS projects. The largest and most 
complex FMS in the United Kingdom is the ’’Scamp” system, manufactured by the 
600 Group Pic, a major machine tool manufacturer. The ’’Scamp” system is 
located in the company’s facility in Colchester, England. The British 
Government provided at least 50 percent of the $4.5 million cost of the 
’’Scamp” system. Anderson Strathclyde Pic, Matherwell, Scotland, a mining 
machinery manufacturer, will be installing an FMS system tied into five CNC 
horizontal borers. Government grants and EC programs will constitute $6.7 
million of the estimated $11.2 million cost of the system. 1/ Other FMS 
installations include a $1.5 million system manufactured by Kearney & Trecker 
Marwin Ltd., located at Normalair-Garrett Ltd., Yeovill, Somerset. 

In the area of robotics, Unimation (Europe) Ltd., Telford, the British 
subsidiary of Unimation, Inc., recently received $5.4 million in United 
Kingdom Government grants for plant expansion totaling $15 million. 2/ 


France 


Industry .—By the end of 1981, there were 163 firms in France engaged in 
producing machine tools. In 1977 and 1978, according to estimates from 
CECIMO, there were approximately 173 firms producing machine tools. In 1979, 
the number of firms dropped to 167 and in 1980 to 165 firms. 3/ In contrast, 
in 1976, the number of firms manufacturing machine tools totaled 130, of which 
9 were subsidiaries of U.S. firms, accounting for 18 percent of sales, and 20 
were subsidiaries of firms in other foreign countries, generating 24 percent 
of total sales. Employment in the French industry was 17,089 persons, with 59 
firms employing 1 to 100 persons, 42 firms employing 101 to 499 persons, and 
29 firms each employing 500 or more persons. 4/ However, despite Government 
efforts during 1976 to the present to consolidate and revive the industry, 
there have been a number of business failures (see Government involvement). 

Employment in the French machine tool industry has declined steadily from 
1978 to the present. The industry employed 17,661 persons in 1982, a decline 
from 18,984 persons in 1981. 5/ In 1981, the French machine tool industry 
employed an estimated 115 workers per firm. Employment decreased to 19,650 in 
1980 from 20,158 in 1979, and 20,745 in 1978. 

In 1982, French machine tool production was valued at $619.8 million, a 
decrease from $953.9 million in 1980. 6/ Production increased to $877.2 
million in 1979 from $590.6 million in 1977. Exports totaled $315.7 million 
in 1982, decreasing from $515.9 million in 1980. In 1977, exports were valued 


1/ Ibid. 

2/ David Krammer, ’’New Technology Urged for Britain,” American Metal Market , 
May 2, 1983, p. 21. 

3/ CECIMO. 

4/ U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine Tools-France , CMS 79-405, Aug. 1979, p. 7. 

5/ Statistics from CECIMO. 

6/ Figures for production, exports, imports, and consumption are from 
American Machinist February issues, 1979-83. 









70 


at $269.3 million. Imports declined to $484.2 million in 1982 from $566.6 
million in 1981. Imports were valued at $286.2 million in 1977. French 
machine tool consumption was valued at $788.3 million in 1982, a decline from 
peak consumption of $992 million in 1980. Consumption increased to $790.2 
million in 1979 from $630.2 million in 1978 and $607.5 million in 1977. 

Exports of machine tools as a share of production stood at about 51 
percent in 1982, up from 48 percent in 1981. The percentage grew approximately 
to 54 percent in 1980 from 45 percent in 1977. The ratio of imports to 
consumption generally increased to about 61 percent by the end of 1982, from 
47 percent in 1977. Similarly, the ratio of metal-cutting to metal-forming 
machine tool production increased during 1977-82. In 1982, the ratio was 
3.8:1, an increase from 2.4:1 in 1977. 

In 1982, France had a negative balance of trade in machine tools, which 
was also the case in 1981, 1980, and 1977. In 1978 and 1979, the country 
maintained a positive balance of trade in machine tools. 

Government involvement .—The French Government has continually attempted 
to revive the machine tool industry by restructuring and consolidating firms. 

In 1976, the Government proposed consolidating some of the largest 
manufacturers, as well as reducing imports and promoting the rapid production 
and use of NC equipment. 1/ 

In November 1981, the French Government adopted a 3-year development 
program for the machine tool industry. The program was designed to generate 
$410 million in direct Government aid and $290 million in Government-backed 
loans. 2/ It was developed around three main concepts: (1) the machine tool 
industry had to be ’’pushed into concentrating on the high-technology sectors 
of the market;” (2) the firms in the industry were to be ’’regrouped and 
refinanced in order to develop larger companies with more competitive 
resources in management, research, and distribution;” and, (3) the French 
Government intended to reduce imports of numerically controlled machines from 
60 to 30 percent by 1984. 3/ Also, in November 1981, the French Government 
was reported to have required importers of machine tools to obtain licensing 
visas in advance of delivery, effectively creating a nontariff trade 
barrier. 4/ 

In 1980, the French Government stated that French manufacturing companies 
used only 10,000 numerically controlled machines, compared with 50,000 in 
Japan and 30,000 in West Germany. 5/ In late 1981, one of the mechanisms the 
French Government implemented in order to expand and modernize the nation's 
machine tool stock was the MECA system (Machines et Equipments de Conception 
Avancee). The MECA system provides for an increase of public orders for the 
nationalized industries, education, and research. It also granted operating 
subsidies for purchasing new equipment. The French Government also supported 

1/U.S. Department of Commerce, Industry and Trade Administration, Country 
Market Survey: Machine Tools-France . CM79-405, Aug. 1979, p. 6. 

2/ Business Week . Dec. 28, 1981, pp. 69 and 70. 

3/ Terry Dodsworth, ’’Test Case for Industrial Policy: How France is Trying 
to Revive its Machine Tool Industry,” Financial Times . Dec. 10, 1981, p. 19. 

4/ "Trying Protection to Curb Job Losses,” Business Week . Dec. 28, 1981, 
p. 69. 

5/ Ibid. 









71 


a ’’public ordering scheme, valued at about 1.2 billion francs (US $220 million 
in 1981 dollars), to equip engineering training schools with more advanced 
tools.” 1/ 

In December 1981, the French Government adopted a research plan for the 
machine tool industry. The plan focused on three key fields: machine tool 
design, manufacturing processes, and automation. Research is to be conducted 
at existing facilities, particularly at CERMO (Centre d* Etude et de Recherche 
de la Machine-Outil) and at CETIM (Centre Technique des Industries 
Mecaniques). The research plan relies on public financing and selection of 
research topics, and followup research, with the evaluation of results 
performed by a special committee. 

In 1981, the French Government allocated 2.3 billion francs 
(US $423.2 million in 1981 dollars) in direct State aid to be matched by 1.7 
billion francs (US $312.8 million in 1981 dollars) from firms in the machine 
tool industry and private-sector sources for the restructuring of firms in the 
machine tool industry. 2/ The Government had envisioned 15 main groups in the 
industry, with firms tied to the restructuring program through about 15 con¬ 
tracts between the Government and the industry’s larger firms. 3/ In July 
1981, a State-run holding company was created, Machines Francaises Lourdes, and 
divided into two subsidiaries—one for milling and boring machines and the 
other for lathes—to regroup the major heavy-machine tool builders. 4/ The 
holding company was to be capitalized with 200 million to 300 million francs 
(US $31.7 million to US $47.6 million in 1982 dollars) with the holding 
company's ownership divided among a State investment corporation, Institut de 
Development Industriel ”IDI” (35 percent), other State-owned companies in the 
automotive, aeronautics, and mechanical engineering industries (51 percent), 
and private interests (14 percent). 5/ During 1982-85, the holding company 
would invest 500 million francs (US $76 million in 1982 dollars). 6/ 

The lathes subsidiary, called BS, comprised the operations of Saint-Etienne 
Machine Outil and a plant of Berthiez, a subsidiary of the State-owned 
SNECMA. 7/ The boring and milling subsidiary, Line-Forest, comprised the 


1/ Ibid. 

2/ Terry Dodsworth, "Test Case for Industrial Policy,” Financial Times , Dec. 
10, 1981, p. 19. See also Commission of the European Communities, The 
European Machine Tool Industry, Commission Statement, Situation and 

Prospects ,SEC (83) 151, Brussels, Belgium Feb. 8, 1983 p. 45. 

3/ "Frogmarched by Dreyfus,” The Economist , Dec. 26, 1981, p. 90. 

4/ ’’France's Machine Builders Are Regrouped”, American Machinist . August 
1982, p. 49. 

5/ J. Russell Kraus, "French Gov’t Would Regroup Machine Tool Manufacturers,” 
American Metal Market , Apr. 19, 1982, p. 5. See also Martyn Chase, "French 
Set US Tool Sales Drive,” American Metal Market . Jan. 17, 1983, p. 25. State- 
owned companies with an interest in Machines Francaises Lourdes include a 
State investment corporation, Institut de Development Industriel (IDI); 
automobile manufacturers Renault and Peugeot; SNECMA, a jet engine builder; 
SNIAS, an airframe manufacturer; Alsthon, a large manufacturer of electrical 
equipment and turbines, and Usinor SA and Sacilor SA, large steel producers. 

6/ J. Russell Kraus, "French Gov't Would Regroup Machine Tool Manufacturers,” 
American Metal Market , Apr. 19, 1982, p. 5. 

7/ "France’s Machine Builders are Regrouped”, American Machinist . August 

1982, p. 49. 













72 


activities of Line SA plant in northern France at Albert and the central 
southern plant at Capdenac of Travail Mecanique Industries (TMI). 1/ However, 
the regrouping left out four other Line SA’s plants. In the Line SA group, 
Gambin, a manufacturer of milling machines, and Gendron, a manufacturer of 
grinding machines, were temporarily detached from the Line Group to be 
integrated with another major group at a later date. Albert Machine-Outil, 
also a member of the Line group, was to be converted into a used-machine-tool 
rebuilding firm. 2/ In 1981, Line SA, TMI, Saint-Etienne, and Berthiez did 
less than $100 million in business and employed approximately 2,000 
persons. 3/ As of the summer of 1981, the estimated investment for the 
successful regrouping of the BS and Line-Forest subsidiaries totaled $115 
million. 4/ 

In the summer of 1981, another State-run holding company was established 
by the nationalized Banque de L'Indochine et de Suez in order to merge the 
activities of Graffenstaden, a subsidiary of the nationalized Compagnie 
Generale d’Electricita group specializing in machining centers, Hure SA, 
specializing in boring machines, and H. Ernault Somua (privately owned), which 
manufactures ’’catalog” NC lathes, boring and milling machines, and machining 
centers. In 1980, H. Ernault Somua (HES) split with the private Empain- 
Schneider Group. At the time of its regrouping with Graffenstaden and Hure, 
HES was in a joint venture where it held 35 percent of the joint company with 
Toyoda (Japan) for the production of machining centers. 5/ Line SA, TMI, 
Saint-Etienne, Berthiez, Hure SA, and Graffenstaden were all either heavily 
indebted to the French Government or were subsidiaries of nationalized 
corporations. 6/ 

Companies participating in the French Government’s restructuring and aid 
program were required to sign contracts with the Government stating the firm’s 
area of specialization and agree to increase training, expand domestic and 
foreign sales efforts, and commit about 5 percent of sales to research. 7/ 

In early 1983, MFL Machine Tool, Inc. in Essex, Conn., received $3 
million from the French Government. MFL Machine Tool, Inc., is owned by the 
State-run holding company Machines Francaises Lourdes of Paris and is a sales 
and service company in the United States for the French machine tool firms of 
Forest, Line, Saint-Etienne and Berthiez. The company allows French firms to 
sell direct to customers, rather than through importers. 8/ 


1/ Ibid. 

2/ J. Russell Kraus, ’’French Gov’t Would Regroup Machine Tool Manufacturers,” 
American Metal Market . Apr. 19, 1982, p. 5. 

3/ ’’France's Machine Builders are Regrouped,” American Machinist , August 
1982, p. 49. 

4/ Ibid. 

5/ ’’France’s Machine Builders Are Regrouped,” American Machinist . August 
1982, p. 49. 

6/ J. Russell Kraus, "French Gov’t Would Regroup Machine Tool Manufacturers,” 
American Metal Market . Apr. 19, 1982, p. 5. 

1J Terry Dodsworth, "Test Case for Industrial Policy,” Financial Times . Dec. 
10, 1981, p. 19. 

8/ Martyn Chase, ’’French Set US Tool Sales Drive,” American Metal Market . 

Jan. 17, 1983, pp. 1 and 25. 









73 


In the spring of 1983, the French Government extended its restructuring 
plan for the machine tool industry by 1 year, through 1986. The reason cited 
was the recent lack of demand. Also, as of the spring of 1983, approximately 
30 of the 160 French machine tool builders had signed Government-industry 
investment contracts worth 400 million francs (US $55 million). The French 
Government has yet to allocate around 3.3 billion francs (US $455 million) to 
investments as well as 200 million francs (US $29 million) worth of research 
and development aid. 1/ 

Despite the French Government’s restructuring efforts, several French 
machine tool firms have recently failed. In April 1982, Promat, which in 1980 
acquired Dufour, a manufacturer of heavy milling machines, filed for 
bankruptcy. 2/ In April 1983, Realisations d'Appareils et Machine Outils 
(Ramo) , a major French manufacturer of NC lathes, filed for bankruptcy. The 
firm’s failure was caused by ’’the sharp deterioration in market conditions and 
because of large imports of competing Japanese machines.” 3/ Under the French 
Government's restructuring plan, Ramo was to merge in July 1984 with another 
firm, Cazeneuve, with about 88 million francs (US $12.7 million) in aid 
allocated by the Government for the two companies. 4/ 


Other countries 

The following industry profiles focus on those countries whose industries 
have either increased their shares in the U.S. machine tool market (Taiwan, 
Switzerland, Spain, and Korea) or are themselves sizable markets and 
world-ranked producers (U.S.S.R., East Germany, and Romania). The People’s 
Republic of China is also discussed, since it has the potential to become a 
world leader in consumption and production as China’s Government increases its 
drive toward production and use of machine tools. 


U.S.S.R 


Industry .—In 1982, Soviet machine tool production was valued at $2.93 
billion, of which metal-cutting machine tools accounted for about 
$2.27 billion and metal-forming machine tools, $665.3 million. 5/ Production 
amounted to 205,000 metal-cutting machines and 57,100 metal-forming machines. 
In 1981, NC machine tool production totaled 10,055 units and increased 
slightly to 10,560 units in 1982. However, the quality of the NC machines was 
reported as unreliable to the degree that production of precision parts, such 
as for robot arms, was not currently possible. 6/ In contrast, in 1977, 


1/ J. Russell Kraus, "French Tool Restructuring Extended,” American Metal 
Market , Apr. 18, 1983, p. 18. 

2/ J. Russell Kraus, ’’French Gov't Would Regroup Machine Tool Manufacturers,” 
American Metal Market , Apr. 19, 1982, p. 5. 

3/ "French Lathe Maker Files for Bankruptcy,” American Metal Market . May 2, 
1983, p. 6. 

4/ Ibid. 

5/ Figures for production, exports, imports, and consumption are from 
American Machinist , February issues, 1979-83. 

6/ Anderson Ashburn, "Collapsing Dollar Distorts Study,” American Machinist . 
February 1979, p. 83. 











74 


Soviet production of machine tools totaled $2.2 billion, of which 
metal-cutting machine tools accounted for $1.7 billion and metal-forming 
machine tools accounted for $494.2 million. 1/ Actual quantities produced in 
1977 totaled 237,560 metal-cutting machines, of which 6,300 embodied 
digital-program (including NC and peg-board), and 54,000 consisted of 
metal-forming machines. 2/ In 1977, the U.S.S.R. ranked second in world 
consumption of machine tools, accounting for $2.82 billion; this compares with 
$3.6 billion in 1982. Additional Soviet data are presented in table 25. 


Table 25.—Metalworking machine tools: U.S.S.R. production, by major 

types, 1977-82 


(In thousands of units) 


Type 

1977 

1978 

1979 

1980 

1981 

1982 

Metal-cutting 







machine tools 1/- 

237.56 

237.88 

230.00 

216.00 

205.00 

195.00 

Metal-forming 







machine tools 2/- 

54.30 

55.40 

56.30 

57.20 

57.10 

57.30 

Total- 

291.86 

293.28 

286.30 

273.20 

262.10 

252.30 


1/ Power-driven metal-cutting machines that are not portable by hand and are 
used to remove metal in the form of chips; these machines include lathes and 
planers and milling, honing, lapping, grinding, electroerosion, and ultrasonic 
cutting machines. 

2 J Power-driven metal-forming machine tools that are not supported in the 
hands of an operator when in use and are designed to press, forge, emboss, 
hammer, extrude, blank, spin, shear, and bend metal into shape. 

Source: Central Intelligence Agency, Handbook of Economic Statistics 1983 . 

September 1983. 


Government involvement .—During 1977-81, the machine tool industry in the 
U.S.S.R., which is under the control of the Ministry of Machine Tool and 
Investment Building, was frequently criticized by the State-controlled press 
for not meeting production targets. Reasons cited for the poor performance 
were poor management, excessive red tape, and wastage of metal. Another 
problem was the increasing labor shortage throughout the Soviet economy. 3/ 

The main Soviet research facility for the machine tool industry is the 
Experimental Research and Development Institute for Machine Tools (ENIMS), 
founded in 1931. The institute staff includes 200 doctors and doctoral 
candidates of the technical sciences, as well as hundreds of research workers. 


1/ Ibid., p. 82. and Handbook of Economic Statistics 1983 . Central 
Intelligence Agency, September 1983. 

2/ Ibid., p. 81. 

3/ See also James Grant, ’’Soviet Machine Tools: Lagging Technology and 
Rising Imports,” Soviet Economy in a Time of Change . Joint Economic Committee, 
U.S. Congress, Vol. II, Oct. 10, 1979, pp. 554-580. 


















75 


engineers, and technicians. 1/ ENIMS has several functions: the formulation 
of technical policy for the industry, development of new areas of machine tool 
engineering, forecasts of machine tool development, and coordination of 
efforts of the many organizations engaged in the design and engineering of the 
equipment. 2/ Some of the principal areas of investigation of ENIMS are 
hydraulic and pneumatic equipment, lubrication and electrical switch gear, and 
NC and electrical drive systems. 3/ One area of concern appears to be the 
degree of accuracy in Soviet machining. In this regard, ENIMS has made 
significant contributions to the development of laser interferometers for 
machine-tool-building applications. 4/ ENIMS has cooperation agreements with 
research and development organizations in Hungary, East Germany, Poland, 
Czechoslovakia, and Bulgaria. Other ENIMS ties include working relationships 
with British, Italian, French, and Japanese machine tool manufacturers. 5/ An 
example of some of the research and development relationships are those which 
existed between the U.S.S.R. and France in 1981. The French Machine Tool 
Builders' Coordination Committee was accredited at the U.S.S.R. State 
Committee for Science and Technology. Cooperation between major research and 
development centers in both countries included Centre d’Etude et de Recherche 
de la Machine-Outil (CERMO) and ENIMS, Centre Technique des Industries 
Mecaniques (CETIM), and the Soviet Forging and Pressworking Equipment 
Institute (ENIKMASH), and the French National Agency for the Development of 
Automated Production (ADEPA) and ENIMS. 6/ In 1981, there were also a number 
of joint ventures between French and Soviet manufacturers, e.g., 
Promecan-Sisson-Lehman (France) and Soyuzkuzmash (U.S.S.R.) for the 
development of guillotine shears with production in Azov, U.S.S.R., using some 
French components; and Line SA (France) and the Minsk Machine Tool Production 
Amalgamation (U.S.S.R.) in the joint production of milling and boring 
machines. TJ During 1981-84, joint ventures are to include the following: 

TMI (France) and Ulyanovsk Machine Tool Works (U.S.S.R.), for the production 
of heavy milling machines; St. Etienne Machines-Outils (France) and the 
Kramatorsk Works (U.S.S.R.), for the production of heavy lathes; and 
Constructions de Clichy (France) and the 50 Years of the U.S.S.R. Works 
(U.S.S.R.), for the development of high-capacity internal grinding machines. 8/ 
Also in 1981, Berthiez and the Kolomna Heavy Machine Tool Works were 
negotiating for joint production of large machine tools. 9/ The channel for 
marketing Soviet machine tools in France is Stanko-France. V/0 Stankoimport, 

the Soviet Union’s machine-tool-trading company, is a shareholder in Stanko- 
France . 

The Soviets have exhibited their machine tools at the East German Leipzig 
Spring Fair and also at other Eastern European machine tool trade fairs. The 


1/ "ENIMS: Research and Development of Metal-Cutting Machine Tools for 
Fifty Years of Its Existence," Soviet Export . Jan. 30, 1981, p. 13. 

2/ Ibid. 

3/ Ibid, p. 15. 

A/ Ibid., p. 1A. 

5/ Ibid., p. 15. 

6/ "10 years of Stanko-France," Soviet Export Jan. 30, 1981, p. 33. 

7/ Ibid. 

8/ Ibid. 

9/ Ibid. 





76 


Soviets have scheduled their first international machine tool show for the 
spring of 1984; the show, to be held in Moscow, is sponsored by the Soviet 
Ministry of Machine Tool Building and Stankoimport. 1/ 


East Germany 

Industry .—Currently, the East German metalworking machine tool industry 
is made up of four combines, or ’’kombinats,” which are vertically integrated 
groups of companies. These are the Fritz Heckert Combine, 7 Oktober Combine, 
Herbert Uarnke, and Schmalkalden. The four machine tool combines are under 
the direction of the Ministry of Machine Tool and Processing Machine-Building. 
The industry’s current structure is the result of a reorganization in 1969 and 
1970 of enterprises which were then under the Machine-Building WB (Association 
of State Enterprises). During 1979-81, the organizational structure of the 
machine tool combines was used as the example for establishing the combine 
system throughout East Germany’s entire industry. The Ministry of Machine 
Tool and Processing Machine-Building has two other combines under its 
direction: the Textima Combine, founded in 1979, producing machines for the 

textile industry, household sewing machines, and bicycles; and Polygraph, 
producing printing and bookbinding machines. In 1979, the Kombinat 
Umformtechnik ’’Herbert Warnke” (Erfurt) was expanded by the addition of 
plastics- and elastics-machine-building enterprises, as well as by the Erfurt 
High-Intensity Current System Construction VEB (Volks Eigene Betrieb, or 
people’s own plant). 2/ The following table depicts the structure of the four 
combines making up the East German machine tool industry. 

The combines were formed in 1969 and 1970 according to types of products 
manufactured, and therefore are the sole producers of certain types of 
machines. The Umformtechnik Combine does the pressing for shaping metal, the 
Fritz Heckert Combine performs cutting processing of prismatic work pieces, 
and the 7 Oktober Machine Tool Combine does cutting and rotation-symmetry 
processing. 3/ However, new technologies such as improved shaping methods, 
microelectronics, and robotics affect the combines in different ways. The 
combines have developed within their own organizations supplier capacities, 
research facilities, and marketing functions. For example, both the Fritz 
Heckert Combine and the 7 Oktober Combine have their own foundries. Also, the 
combines have built-up capacities for the development of modern nonnumerical 
controls. 4/ Most of the combines in the industry have their own research 
facilities. For instance, the Fritz Heckert Combine has under its direction 
the Machine-Tool-Building Research Institute in Karl-Marx-Stadt (1,600 
employees), and the Shaping Process Research Institute in Zwickau (300 
employees) has been integrated into the Umformtechnik Combine. The 7 Oktober 
Combine maintains research laboratories in Dresden. Financial support for the 
research centers comes almost entirely from combine funds. Individual plants 


1/ ’’Soviets Slate 1st Int’l Tool Show,” American Metal Market . June 13, 
1983, p. 6. 

2/ Cord Schwartau, German Institute for Economic Research (DIW), West 
Berlin, ’’Machine Tool Construction in the GDR,” ’’Machine Tool Construction in 
the GDR,” translated as ’’Machine Tool Industry Structure, Production 
Outlined,” East Europe Report . Economic and Industrial Affairs, No. 2309, 
Foreign Broadcast Information Service, JPRS 81633, Aug. 26, 1982, p. 25. 

3/ Ibid., p. 26. 

4/ Ibid. 







Table 26.— Metalworking machine tools: Combines in the East German industry, 1981. 


77 




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(VEB’s) and the military purchase research time and facilities from the 
centers. 1/ In late 1979, several joint programs in machine tool research 
were underway. The Fritz Heckert milling machine plant, the combine’s 
research center, and the Technical High School in Karl-Marx-Stadt conducted a 
joint research project on machine tool modular design and welding of machine 
tool structures. The VEB Schleifkorper (grinding heads) Union, the Technical 
High School in Dresden, and the Machine Research Institute in Leningrad 
(U.S.S.R.) were engaged in different grinding research programs with VEB 
Schleifmaschinenwerk (part of the 7 Oktober Combine). 2/ In the area of 
marketing, the foreign trade organization responsible for the entire 
indusry—Werkzeugmaschine and Werkzeug (WMW) Export-Import—has been under the 
direction of the 7 Oktober Combine since 1970. WMW Export-Import maintains 
technical/commercial offices in 20 countries, including the United States. 

The sole manufacturer of NC systems is VEB Numerik in Karl-Marx-Stadt of 
the Automation Systems Building Combine. VEB Numerik also produces robot 
controls, modern nonnumerical controls for milling machines, and CNC’s. VEB 
Numerik receives microcomputers from the Robotron Combine in Dresden. 

The industry is primarily located in southern East Germany, in 
Karl-Marx-Stadt, Leipzig, Gera, Dresden, Suhl, Erfurt, and Halle. The 7 
Oktober Combine is located in East Berlin. 

In 1981, the four combines of the machine tool industry together employed 
81,000 persons. The major factories of the Fritz Heckert Combine had the 
following employment in 1982: Fritz Heckert parent plant, 4,500; Mikromat, 
2,500, including 85 design engineers; and Aschersleben, 2,100, including 100 
design engineers. 3/ M0DUL, a major factory of the 7 Oktober Combine, 
employed 2,000 workers. 4/ The Shaping Process Research Institute of the 
Umformtechnik Combine in 1981 employed 300 persons, and the Machine-Tool- 
Building Research Institute of the Fritz Heckert Combine employed 1,600 
persons. In early 1982, wages of workers in the machine shops at VEB 
Aschersleben—a manufacturer of planers and planomillers, bed grinders, and 
forging presses—were 4.5 to 7 marks per hour. 5/ Apprentices at the 
enterprise were trained according to the traditional ’’Meister” system, which 
also exists in West Germany. 6/ 

In 1982, machine tool production in East Germany was valued at 
$808.0 million. In 1980, the value of production reached a high point of 
$891.5 million, increasing from $641.4 million in 1977. In 1977, East Germany 
was ranked sixth in world production by American Machinist , and at the end of 
1982, East Germany was again ranked sixth. However, during 1978-80, East 
Germany was ranked ninth in world production, and eighth in 1981. In 1982, 
exports were valued at $642 million, or 79.5 percent of production, but had 
reached a high point of $695.3 million in 1980, accounting for only 78.0 


1/ Michael Page, ’’Trends in GDR Machine-Tool Research,” American Machinist . 
January 1980, p. 135. 

2/ Ibid., p. 136. 

3/ Shigeru Kobayashi, ’’The Advanced Machine Tool Industry of the German 
Democratic Republic,” Metalworking Engineering, & Marketing . May 1982, pp. 102, 
104, 106 and 108,. 

4/ Ibid., p. 106. 

5/ Ibid., p. 109. 

6/ Ibid. 






79 


percent of production. In 1977, however, exports totaled $596.6 million and 
accounted for 93 percent of production. In 1982, imports totaled $197 million 
and accounted for 5A percent of consumption. In 1980, imports were valued at 
$257.5 million, and represented around 56 percent of consumption. In 1977, 
imports totaled $173.9 million or 79.5 percent of consumption. During 
1977-82, exports averaged 82.1 percent of production, and imports averaged 
61.7 percent of consumption. 

The first NC machine tools produced in East Germany were manufactured by 
the Fritz Heckert Works in 1964. In late 1976, East Germany decided to 
domestically produce CNC controls, and in 1979, the first East German CNC 
system, the CNC 600, was commercially available. The CNC 600 offered 
’’multiple-axis, continuous-path programming, control of simultaneous movement 
through three axes, and ancillary functions for directing robots, tool 
changers, workpiece pallets,” and similar functions. 1/ In 1981, although 
computer-integrated, storage-programmed NC machine tools predominated in West 
Germany, the widespread production of permanently wired, connection- 
programmed, numerical machine tools prevailed in East Germany. 2/ By early 
1983, 35 to 40 percent of the new products from the Fritz Heckert Combine 
embodied CNC's or PC’s, and all conventional, tape-type NC systems were 
replaced by CNC systems. 3/ Machine tools in production facilities and units 
which will be sold are currently being equipped with robotic tool-changing 
capabilities. 4/ By 1982, several major plants of the Fritz Heckert Combine 
(Fritz Heckert, Mikromat, Aschersleben) had installed NC machines equipped 
with material-handling robots which were also integrated with the production 
line. 5^/ However, ’’industrial robot equipment according to the East German 
categorization criteria encompasses all automation aids which are used for 
independent handling of work pieces, tools, and materials.” 6/ In the 
mid-1970's, East Germany, as well as the United States and Japan, were at a 
higher technological level than West Germany in the areas of processing 
centers and flexible finishing systems. However, East Germany was not able to 
exploit this technological lead because of a breakdown between research, 
application to production, and sales, which resulted only in the production of 
prototypes. In 1981, processing centers were just beginning to play a role in 
exports from East Germany. 7/ In early 1981, the East German metalworking 
industry was using about 280,000 cutting machine tools and 18,500 presses, 
including 2,000 NC machine tools. 8/ 

Government involvement .—Since East Germany has a centrally planned 
socialist economy, the Government is not only deeply involved in the planning 
of the metalworking machine tool industry, but also is responsible for many of 
the factors within the overall economy that also affect the machine tool 
industry. Within the past few years, the East German metalworking machine 


1/ Michael Page, op. cit., p. 135. 

2/ Cord Schwartau, op. cit., p. 30. 

3/ ’’Advanced CNC is Shown at Leipzig Fair,” American Machinist . May 1983, 
pp. 31 and 32. 

4/ Ibid, pp. 31-32. 

5/ Shiogeru Kobayashi, ’’The Advanced Machine Tool Industry of German 
Democratic Republic,” Metalworking; Engineering & Marketing , May 1982, p. 98. 
6/ Cord Schwartau, op. cit., p. 32. 

7/ Ibid., p. 31. 

8/ Ibid., p. 32. 






80 


tool industry has been confronted with a number of problems which threaten to 
affect the international competitiveness of the industry. In the area of 
price formation, market forces have been disregarded, and machine tool prices 
have risen. High prices charged by suppliers of controls have cut into the 
profitability of exports of finished products. In the product area. East 
German machine tools, on average, are too heavy—by as much as 50 percent in 
some cases. Other problems include the breakdown between research and 
production, the inadequate supply of microcomputers for CNC controls, and 
investment policy. 1/ In recent years, the economic goals of Government 
leadership have not coincided with those of managers and engineers in the 
industry. Government leadership views the economic planning process in terms 
of limited resources. Therefore, it is against policies which would require 
new investment to raise productivity while at the same time removing so-called 
obsolete capital stock from use. Such a policy is viewed as a waste of 
national assets. The economic leadership perceives that automation can be 
integrated into existing capital stock through applying structural components, 
subsystems, and controls. In contrast, the industry’s managers and engineers 
recognize that existing equipment cannot be fitted with robots and 
transportation systems because of the design differences of existing machine 
tools with respect to current operating spaces. Leading engineers and 
scientists at the 1982 Leipzig International Metalworking Congress expressed 
the view that automation could not be successfully applied to existing 
equipment, stating, ”We know from the lessons learned since the introduction 
of NC equipment about a decade and a half ago that a subsequent adaptation and 
equipment of existing machines cannot achieve working solutions.” 2/ 

East Germany’s current economic target for the metalworking machine tool 
industry calls for a growth rate of 41 to 43 percent during 1981-85; the 
target for industry as a whole is only 28 percent. 3/ 


Switzerland 


Industry .—In 1981, there were around 175 firms in the Swiss machine tool 
indusry, of which about half were members of the Machine Tool Division of the 
Swiss Association of Machinery Manufacturers (Gruppe Werkzeugmaschinen, Verein 
Schweizerischer Maschinen-Industrieller (VSM)). The 1979 and 1980, there were 
approximately 178 firms, decreasing from 180 in 1978 and 181 in 1977. 4/ 

During 1978-82, employment in the Swiss machine tool industry steadily 
decreased. In 1982, employment numbered 16,000 persons, representing a 
decrease from the 17,300 persons employed in 1978. 5/ The largest yearly 
decrease in employment occurred during 1981 and 1982. In 1981, employment was 

1/ Ibid., p. 31. 

2/ Cord Schwartau, op. cit., pp. 33-34. 

3/ Eugene DiMaria, ”E. Germany Eyes Ways to Build US Tool Sales,” American 
Metal Market , p. 10. 

4/ Swiss Machine Tools: Information 1981 . Verein Schweizerigeher 
Maschinen-Industrieller, 1981 and CECIMO. 

5/ Post-hearing submission of the European Committee for Cooperation of the 
Machine Tool Industries (CECIMO), U.S. International Trade Commission, 
investigation No. 332-149, July 13, 1983, attachment D, citing CECIMO Member 
Reports. 








81 


16,600 with an estimated 94 workers per firm, and by 1982, it had declined by 
600 persons. 

In 1981, Swiss machine tool manufacturers' profits showed a major 
decline. Machine tool builders in September 1981 had a 7.8-month backlog of 
orders, but by September 1982, this backlog had declined to 6.5 months, and 
has since continued to decline. 1/ Swiss machine tool builders appear to be 
moving toward the development of specialized machinery and parts with an 
"emphasis on engineering and planning" and away from standardized 
machines. 2/ Swiss manufacturers of CNC lathes and machining centers were the 
hardest hit in the industry by the recent market downturn. 3/ During the 
recent business slowdown, Swiss machine tool builders began to restructure 
both their domestic and foreign manufacturing operations. Efforts are being 
focused on "maintaining a technological edge for sophisticated, high-precision 
machine tools and boosting automation." 4/ Traditional controls are being 
replaced wherever possible by programmable controllers or microprocessor 
controlled systems, that is, by NC or CNC systems. 5/ The use of standardized 
components in the production of basic machine tool units, as well as the 
manufacture of products permitting the attachment of automated peripheral 
equipment, are being expanded. 6/ Swiss machine tool builders also have 
realized that some products may be overengineered. Ateliers des Charmilles SA 
(Geneva), which specializes in EDM machines, recently realized that the 
company had overengineered its machines, thereby making them too expensive to 
produce. Also, the company had not placed enough emphasis on marketing. TJ 

There have recently been a number of corporate restructurings. These 
restructurings include a joint venture between Charmilles (51 percent 
ownership) and Georg Fischer (49 percent) in the production and sales of EDM 
machines—the venture occurred after Charmilles sold its turbine and heating 
installation operations, and a joint venture between the Georg Fischer Group 
and Toyoda Machine Works Ltd. (Japan) for the production of NC lathes, 
computer-controlled flexible lathe systems, and associated equipment to be 
marketed in Japan by Georg Fischer’s Japanese manufacturing and sales 
subsidary, Nissin Machine Co., Ltd. In October 1982, Georg Fischer, after 
selling its textile machinery subsidiary, Reuti Maschinenfabrik, acquired a 
51-percent share of Burkhardt & Weber GmbH & Co., Reutlingen, West Germany (it 
is estimated the acquisition almost doubled the production capacities for 
specialized machinery centers and multipurpose workshops for the George 
Fischer Group). 8/ In another restructuring of foreign operations, five 
small- and medium-sized Swiss machine tool firms (Ewag AG, Wahli AG, Kummer 
AG, Tripet AG, and Agfura Automatisch-Fiering) were planning to establish a 
cooperative sales and service center with a possible assembly or partial 
manufacturing operation in Rhode Island in February 1983. 


1/ J. Russell Kraus, "Swiss Tool Builders Badly Hit by Order Slump," 
American Metal Market , Mar. 21, 1983, p. 8. 

2/ Ibid. 

3/ Ibid. 

4/ J. Russell Kraus, "Swiss Tool Builders Restructuring Operations," 
American Metal Market , Mar. 14, 1983, p. 8. 

5/ U.S. Department of State Telegram, U.S. Embassy, Bern, Switzerland, Mar. 
16, 1983. 

6/ J. Russell Kraus, "Swiss Tool Builders Restructuring Operations," 
American Metal Market , Mar. 14, 1983, p. 8. 

7/ Ibid. 

8/ Ibid. 







82 


By 1982, Swiss machine tool production had declined to $768.4 million 
from $994.1 million in 1981. 1/ In 1977, Swiss production of machine tools 
totaled $580.3 million. In 1982, Swiss exports of machine tools totaled 
$679.8 million, compared with $869.9 million in 1980; in 1977, such exports 
totaled $493.4 million. Imports in 1982 totaled $172.4 million, representing 
a decrease from $225.1 million in 1980; imports in 1977 totaled $76.9 
million. Consumption followed the same pattern, declining to $261.1 million 
in 1982 from $349.3 million in 1980. Consumption totaled $163.8 million 1977. 

During 1977-82, Swiss exports of machine tools, as a share of total 
production, increased only slightly, to 88.5 percent in 1982 from 85.0 percent 
in 1977. However, imports as a share of apparent consumption increased to 
66.0 percent in 1982 from 46.9 percent in 1977. In production, the ratio of 
metal-cutting machine tools to metal-forming machine tools, based on value, 
was 6:1 in 1977. However, by 1980, there was a dramatic shift in the ratio, 
to 19:1, which decreased to 18:1 in 1982. 

Government involvement .—Limited information available in this study 
indicates that the Swiss machine tool industry receives support from the Swiss 
Government. The Federal Institute of Technology in Zurich maintains a special 
institute for machine-tool-related research. The institute, in cooperation 
with private industry, conducts basic research in the fields of new materials 
and electronic controls, especially CNC controls for future applications. 2/ 


Romania 


Industry .—In January-March 1983, approximately 30 major plants in 
Romania were manufacturing machine tools. The activity of the machine tool 
industry is coordinated by the Industrial Group for Machine Tools of the 
Ministry of Machine Tool Industry, Electrotechnics, and Electronics. The most 
important metalworking machine tool enterprises and their products are as 
follows: 

o Machine Tools and Aggregate Enterprise ^ Bucharest: vertical 
boring and turning mills; horizontal boring-drilling-milling 
machines; machining centers, grinding machines; jig and boring 
machines. 

o Heavy Equipment Enterprise . Cariova: heavy lathes; gantry 
plane-milling machines; cylindrical gear machines; presses; 
cylindrical grinding machines. 

o Lathe Enterprise . Tirgoviste: single-spindle, automatic 
lathes; automatic turret lathes. 

o Infratirea Enterprise . Oradea: boring machines; threading 
machines; planing machines; milling machines. 

o Lathe Enterprise . Arad: slide lathes; frontal lathes; turret 
lathes. 


1/ American Machinist. February issues, 1979-83. 

2/ U.S. Department of State Telegram, U.S. Embassy, Bern, Switzerland, Mar. 
16, 1983. 













83 


o Mechanical Enterprise . Roman: vertical boring and turning 
mills. 

o Machine Tool Enterprise . Bacau: horizontal boring and milling 
machines; gantry milling machines. 

o Mechanical Enterprise . Suceava: forging machines, presses. 

o Sp ecial Machine Tool Enterprise . Iasi: machining centers; 
multistation machines. 

o Mechanical Enterprise . Cugir: milling machines. 

o Mechanical Enterprise , Baia Mare; hydraulic control mortising 
machines; broaching machines; honing machines. 1/ 


New production facilities are being constructed at Cluj-Napoca (grinding 
machines), Bistrita-Nasuad (various types of machine tools), and Dorohoi 
(metal-forming machine tools). The Heavy Machinery Plant in Bucharest, as 
well as some other industrial enterprises, has been commissioned to 
manufacture special machine tools for the Romanian nuclear energy program. 2/ 

In 1982, Romanian machine tool production totaled $615.5 million, 
declining from $624.9 million in 1981. In 1977, however, production was 
valued at only $120 million. 3/ Romanian production (table 27) of 
metal-cutting machine tool units totaled 32,040 in 1982, representing a 
decrease from 36,070 units in 1981. In 1979, production totaled 29,000 units, 
a decrease from 30,070 units in 1977. 4/ 

In 1982, Romanian imports of machine tools totaled $197.5 million, 
compared with $374.1 million in 1979. Imports total $150 million in 1977. 
Exports in 1980 and 1982 were valued at $145 million, compared with $134 
million in 1981. In contrast, exports in 1977 were valued at $40 million. 

Romanian consumption of machine tools declined to $668.5 million in 1982 
from $803.3 million in 1981; consumption was valued at $230 million in 1977. 
During 1977-82, Romania experienced a negative balance of trade in machine 
tools, measured by value. In 1982, the ratio of the value of imports to 
exports was 1.3 to 1; however, in 1977, the ratio was 3.7 to 1. Both the 
ratio of exports to production and the ratio of imports to consumption 
decreased during 1977-82. In 1977, exports as a share of production were 33.3 
percent. Exports declined to 21.4 percent of production in 1981, but 
increased slightly to 23.5 percent in 1982. Imports as a share of consumption 
declined from 65.2 percent in 1977 to 29.5 percent in 1982. 


1/ U.S. State Department Telegram, U.S. Embassy, Bucharest, Romania, Mar. 1, 
1983. 

2/ Ibid. 

3/ Figures are from American Machinist , February issues 1979-1983. 

4/ Central Intelligence Agency, Handbook of Economic Statistics 1980 . 
September 1983. These statistics vary from the statistics used in table 27 
because of different data sources. 











84 


Table 27.—Metalworking machine tools: Romanian production, by types 

1977-81 


(In units) 


Item 

1977 

1978 

1979 

1980 

1981 

stal removing: 

Lathes- 

7,427 

7,288 

7,393 

7,779 

7,944 

Horizontal boring and milling 
machines- 

421 

438 

436 

607 

1/ 

Milling machines- 

2,888 

2,992 

2,977 

3,033 

3,349 

Grinding machines- ; - 

966 

1,028 

988 

1,228 

1/ 

Gear-cutting machines- 

208 

249 

222 

311 

336 

All other- 

18.161 

15.202 

15,173 

16.481 

25.085 


Total- 


30,071 


27,197 


27,189 


29,439 


36,714 


Metal forming: : : : : : 

Hydraulic presses-: 216 : 118 : 272 : 395 : 771 

All Other-: 2.212 : 2.741 : 2,727 : 3.074 : 2.266 

Total-: 2.428 : 2,859 : 2.999 : 3.469 : 3,037 

Grand total-: 32,499 : 30,056 : 30,188 : 32,908 : 39,751 


1/Not available. 


Source: U.S. Department of State Telegram, U.S. Embassy, Bucharest, 
Romania, Mar. 1, 1983, citing official Romanian Government statistics. 


Government involvement .—Until 1981, the machine tool industry was 
coordinated by CIMUMFS (the Industrial Central for Machine Tools Precision 
Machinery and Tools). In 1981, CIMUMFS was separated into two independent 
agencies, CIMU (the Industrial Central for Machine Tools) and CIMF (the 
Industrial Central for Precision Machinery). Both agencies are a part of 
MIMUEE, the Ministry of the Machine Tool Industry, Electrotechnics, and 
Electronics. CIMU had 21 plants under its control in 1981, and CIMF 
controlled 13 plants which produced tools, gaging equipment, and hydraulics. 1/ 
CIMU's plans in 1981 included the beginning of production on assembly lines 
and the development of cooperative arrangements with firms in CMEA (Council 
for Mutual Economic Assistance), the West, and in developing countries. 2/ 

In 1979, Romania had signed a series of technical agreements with foreign 
producers, including Berthiez and H. Ernault Somua of France, Pama of Italy, 
and Toshiba and Mitsui Seiki of Japan. In 1980, agreements on machining 
centers were reached with Scharmann (West Germany), TMI Forest (France), and 
Yasuda (Japan). 

Romania's current Five-Year Plan for 1981-1985 has targeted the metal¬ 
working machine tool industry for an annual growth rate of 19 percent. 

However, the machine-building industry as a whole is projected to have an 


1/ Ashburn, Anderson "The 1981 Machine-Tool Standings," American Machinist . 
February 1982, pp. 110 and 111. 

2/ Ibid., p. 111. 




























85 


average annual growth rate of only 8.8 percent. The 1983 plan allocates $600 
million to projects in the production of metalworking machine tools. 1/ 
Development plans for the industry through to 1985 call for a significant 
upgrading of technology, including the production of sophisticated machine 
tools such as NC and CNC types. During 1983-85, the metalworking machine tool 
industry will focus on the development and production of the following: 

o New range of grinding machines, 

o High-speed presses with large production capability, 
o Heavy presses, between 200 and 1,000 tons, and 
o Machine tools for the automotive industry including— 

- CAM profile grinding machines, 

- Crankshaft machines and testing equipment, 

- Balancing machines, 

- Gear-box-hardening equipment, 

- Connecting rod machines for axle shaft manufacturing, and 

- Robots for the operating of cutting machine tools and forging 

presses. 2/ 


People’s Republic of China 

Industry .—The General Bureau of Machine Tools (GBMT) of the First 
Ministry of Machine Building governs factories which produce metal-cutting 
machines, metal-forming and forging machines, foundry equipment, machine tool 
parts, measuring instruments, cutting tools, abrasive materials, grinding 
tools, synthetic diamonds, borazon, and timber-processing machines. The 
divisions in the General Bureau of Machine Tools determine machine tool 
development policy, as well as annual and long-term plans. 3/ 

In 1981, the General Bureau of Machine Tools of the First Ministry of 
Machine Building had under its direction 121 major factories and 7 large 
research institutes. 4/ In 1979, 1 source estimated the number of machine 
tool establishments at 30 large-scale plants (not defined, but probably 
greater than 4,000 persons) and 150 to 200 small-sized plants. 5/ 

Basic and applied research in the machine tool industry is promoted 
through an association of major plants, research institutes, and technical 
universities. Fundamental theory and new technology development occur at the 
following universities which have machine tool research centers: Qinghua 
University, Beijing; Jiaontong University, Xian; the Central-China Institute 


1/ U.S. Department of State Telegram, U.S. Embassy, Bucharest, Romania, 

Mar. 1, 1983. 

2/ Ibid. 

3/ Liang Xunxian, ’’China’s Machine Tool Industry,” The China Business 
Review , November-December 1981, p. 30. 

4/ Ibid., p. 30. 

5/ Shigeru Kobayashi, ’’China’s Machine Tool Industry ’Yesterday and 
Today’ - The March Toward Modernization—An On-the-Spot Report;” Metalworking 
Engineering & Marketing , November 1979, p. 23. 









86 


of Technology; the Dalian Institute of Technology; and the Northeast China 
Institute of Technology. 1/ The Machine Tool Research Institute in Beijing, 
the largest of its kind in China, conducts fundamental research on machining 
and manufacturing technology, machine tool structure, measuring, testing, and 
automation techniques, and also acts as the national information center for 
machine tool technology. Some major machine tool plants have established 
their own research institutes, such as the Shanghai Grinding Machine Research 
Institute (Shanghai Machine Tool Plant) and the Beijing Milling Machine 
Research Institute (Beijing No. 1 Machine Plant). 2/ 

The Beijing Machine Tool Research Institute and the Chinese Mechanical 
Engineering Society jointly publish the monthly magazine Machine Tool . China’s 
most authoritative magazine on the subject. 

Large-scale plants frequently provide services to their employees and 
sometimes function like communes. Facilities include kindergartens, 
elementary and middle schools, hospitals, day-care centers, and living 
quarters. 3/ 

The major problems in the industry in 1979 were lack of coordination 
between research and development and applications resulting in stagnant 
innovation, inefficient production technology with low operating rates (30 to 
40 percent) and no inventory control, and plants unable to achieve an area of 
specialization since so much of their resources were devoted toward 
manufacturing most of their own parts. 4/ Japanese executives noted the 
following problems in 1982 in the Chinese machine tool industry: antiquated 
machine design, crude electrical parts, an inefficient production process 
where each plant produces most of its supplies of specialty steel, and the 
inadequate technical level of the workers and their lack of enthusiasm for 
quality control. 5/ 

In 1982, Chinese machine tool production totaled $470 million, an 
increase from $355 million in 1977. 6/ Although the value of production 
during 1977-82 steadily increased, the number of machine tools decreased to 
103,000 in 1982 from 200,000 in 1977. 1_/ In 1982, Chinese imports of machine 
tools totaled $130 million, representing a decrease from $140 million imported 
in 1981. Between 1977 and 1981, imports grew substantially, but totaled only 
$50 million in 1977. Consumption of machine tools in China was valued at $495 
million in 1982, representing a decline from the consumption peak in 1981 of 
$535 million. In 1977, consumption was valued at $395 million. 


1/ Liang Xunxian, op. cit., p. 30. 

2/ Ibid., p. 31. 

3/ Shigeru Kobayashi, ’’China’s Machine Tool Industry ’Yesterday and Today’ - 
March Toward Modernization-An On-The-Spot Report,” Metalworking, Engineering 
and Marketing . November 1979, p. 25. 

4/ Ibid., pp. 23-25. 

5/ Shigeru Kobayashi, ’’The Reality of ’Readjustment’ in China,” Metalworking 
Engineering & Marketing . January 1982, pp. 104 and 105. 

6/ Figures for production, imports, exports, and consumption are from 
American Machinist February issues 1979-82. 

7/ Central Intelligence Agency, Handbook of Economic Statistics . September 
1983. 










87 


In 1979 and 1980, China annually exported over 10,000 metal-cutting and 
metal-forming machine tools. In 1979, the types of machine tools exported 
were as follows: lathes, 30 percent; shapers, and similar machines, 12 
percent; milling machines, 10 percent; drilling machines, 9 percent; grinding 
machines, 5 percent; and boring machines, 2 percent. Other machine tool 
exports consisted of metal-forming machines and included presses, 26 percent 
of total machine tool exports; and guillotine shears, pneumatic hammers, and 
universal shearing and punching machines, constituting the remaining 6 
percent. 1/ 

By year end 1982, exports as a share of production stood at 5.3 percent 
(based on value), representing a decrease from 6.8 percent in 1981. Prior to 
1981, the share of exports to production grew from 2.8 percent in 1977 to 6.7 
percent in 1980. Imports as a share of consumption stood at approximately 23 
percent in 1982, which was a decrease from 26 percent in 1980. During 
1977-80, the ratio of imports to consumption was approximately 13 percent. 

By 1981, China had developed the technical capacity to produce 1,400 
types of machine tools. 2/ During 1977-82, the production ratio of 
metal-cutting to metal-forming machine tools (based on value) was 
approximately 3 to 1. 

Government involvement .—Two State organizations handle imports and 
exports of machine tools: the China National Machinery and Equipment Import 
and Export Corporation (EQUIMPEX), established in February 1980 by the First 
Ministry of Machine Building; and the China National Machinery Import and 
Export Corporation (MACHIMPEX), under the Ministry of Foreign Trade. EQUIMPEX 
frequently appoints foreign agents to conduct business on its behalf. Machine 
tool purchases, though, are generated by local governments upon request from 
end users. 3/ 

In acquiring machine tools and machine tool technology and know-how, 

China is seeking coproduction arrangements between foreign manufacturers and 
its industry rather than through the direct purchase of machinery, 
countertrade, licensing, or joint ventures. 4/ Licensing arrangements have a 
disadvantage in that foreign currency is paid for licenses, whereas the 
Chinese would prefer foreign firms to bear some investment and marketing 
costs. In coproduction arrangements, the product is made in China with some 
output going to the foreign company. The foreign company either supplies 
parts for the product or engineering drawings of the product. 


1/ Liang Xunxian, op. cit., p. 32. 

2/ Liang Xunxian, op. cit., p. 30. 

3/ Warren Storey, ’’China Pressing for Co-Production In Machine Tool, Heavy 
Equipment," American Metal Market , May 5, 1983, p. 26. 

4/ Ibid. 





88 


Spain 


Industry .—In mid-1983, there were 131 machine tool builders represented 
in the Association of Spanish Machine Tool Manufacturers (AFM). AFM’s 
membership consisted of 129 members representing about 95 percent of Spain’s 
machine tool production in 1982. 1/ In 1981, according to estimates from 
CECIMO, there were approximately 145 firms producing machine tools. During 
1977-80, the number of firms decreased: in 1977, there were 158 firms, 
increasingly to 165 firms in 1978, but decreasing to 160 firms in 1979 and 155 
firms in 1980. 2/ The majority of machine tool firms in Spain are 
concentrated in the Basque region, the industrial northwest, around the cities 
of Eibar and Bilbao. 

In mid-1983, according to one estimate, Spain's machine tool industry 
employed 4,500 workers. 3/ At the end of 1982, the industry employed 8,500 
workers, a decrease from the 8,800 workers in the industry in 1981. 4/ In 
1981, Spain's machine tool industry employed an estimated 60 workers per 
firm. In 1977, Spain’s machine tool industry employed 10,500 workers. 

In mid-1983, approximately 12 percent of AFM’s membership was 
cooperatives, which have the designation Societe Cooperative (S. Coop.). The 
cooperatives are businesses with at least 51 percent of the firm owned by the 
workers. 5/ The remainder of AFM’s membership is either privately- or 
investor-held firms, which have the designation Societe Anonymous (S.A.). In 
a cooperative, the workers who are shareholders elect a board of directors, 
which, in turn, hires the firm’s management staff for conducting operations. 
When joining a cooperative, workers are required to make an initial capital 
investment. In 1980, this was about $1,000, but by mid-1983, the amount had 
risen to about $4,900. 6/ Many of the cooperatives, such as the Mondragon 
Workers Co-operative and Danobat (both of which are leading machine tool 
manufacturers in Spain), provide banks, housing, training, employment, and 
sometimes an education through their own technical college to their members. 
Workers employed by cooperatives are considered self-employed by the Central 
Government of Spain and, therefore, are ineligible for welfare from the 
State. Cooperatives have schemes for welfare, housing, pensions, and medical 
care. However, in the area of wages, workers in cooperatives are restricted 
by cooperative rules, which generally state that the top person in the 
organization can earn only three times as much as the lowest paid employee. 7/ 


1/ Repertorio de Fabricantes Espanoles 1980-82 Maquines Herramienta , 

Direccion General De Exportacion, Ministerio de Comercio, 1982, p. 1. 

2/ CECIMO. 

3/ Bruce Vernyi, ’’Huge Machine Tool Conglomerate Planned In Spain,” American 
Metal Market , June 13, 1983, p. 11. 

4/ Association of Spanish Machine-Tool Manufacturers, 1983. 

5/ Ibid. 

6/ ”An Industry Built by Two Schools,” American Machinist . March 1980, 
p. 142. 

7/ Ibid., p. 144, and Max Commander, ’’Small is Beautiful for the Basques,” 
Financial Times , May 12, 1983, p. 28. 










89 


The Caja Lamboral Bank (CLB), established in 1959, provides banking 
services to cooperatives and has financed the establishment of new 
cooperatives, including those in the machine tool industry such as Danobat. 

CLB is, in fact, a credit cooperative. 

The cooperatives in the Spanish machine tool industry are involved in 
research activities. In 1977, several cooperatives, in particular Danobat, 
established a research center, called Ikerlan, to develop electronic controls 
for machine tools. Ikerlan, which is attached to a technical college, 
employed 36 full-time scientists in 1983. 

Recently, a number of corporate restructurings have started to occur in 
the industry. In mid-1983, four major Spanish machine tool cooperatives were 
planning to merge into Spain's largest machine-tool-manufacturing 
conglomeration. The new conglomerate, under the name "Devaco Group,” would be 
made up of Danobat S. Coop., Txurtxill S. Coop., Soraluce S. Coop., and Goiti 
S. Coop. The four companies which would form the Devaco Group are not 
competitors, since they produce different product lines. Danobat manufactures 
horizontal and vertical lathes, grinding machines, assembly lines and 
material-handling machinery; Txurtxill produces small grinding machines; 
Soraluce manufactures boring machines; and Gorti produces presses and 
metal-forming machines. Although the companies will operate as autonomous 
divisions, they will bear the profits and losses of other members and share 
supplies. Under the plan, the companies will draw workers from a central 
labor pool. 1/ It appears that one of the reasons for forming the 
conglomerate is to minimize the economic impacts of the cyclical nature of the 
machine tool business. 2/ In addition to this restructuring, other machine 
tool groups are considering the formation of conglomerates. 3/ 

By year end 1982, Spanish machine tool production totaled 
$299.6 million, a decline from the high point of $352.9 million achieved in 
1980. In 1977, production was valued at $190.9 million. 4/ 

In 1982, Spanish machine tool imports totaled $169.8 million and had 
increased steadily from $91.4 million in 1977. Exports were valued at 
$191.6 million in 1982, a decrease from $228.3 million in 1980. In 1977, 
exports totaled $102.5 million. Consumption of machine tools had increased to 
$277.8 million in 1982 from $178.5 million in 1977. 

During 1977-82, exports as a share of production had grown to 63.9 
percent in 1982, a decline from 66.7 percent in 1981. Exports constituted 
53.7 percent of production in 1977. Imports as a share of consumption had 
increased to 61.1 percent in 1982 from a low of 45.3 percent in 1981. 

However, imports were 51.2 percent of consumption in 1977. Since 1978, 

Spanish machine tool builders have had to rely on increasing exports because 
of a flat market. The two basic reasons that account for the flat market are 


1/ Bruce Vernyi, "Huge Machine Tool Conglomerate Planned in Spain,” American 
Metal Market , June 13, 1983, p. 11. 

2/ Ibid. 

3/ Ibid. 

4/ Figures of production, imports, exports, and production are from American 
Machinist, February issues, 1979-83. 








90 


(1) lack of investment in the Basque region of Spain because of political 
instability and (2) the depreciation of the peseta, the deutsche mark, and the 
French franc. In 1981, the domestic machinery market was stablized by only 
one factor—the $600 million investment by General Motors-Espana for a new 
automobile plant at Zaragoza. 1/ 

In late 1981, the Spanish machine tool builders’ association established 
a trade office in the Chicago area. The office promotes the Spanish industry's 
products by emphasizing the level of quality of Spanish machines. This can be 
seen as part of a trend to increase exports to the United States. In early 
1983, Spanish machine tool builders began changing their distribution struc¬ 
tures in the U.S. market by either establishing direct-sales subsidiaries or 
acquiring and integrating established distributors into marketing networks. 
Spanish machine tool builders are looking toward the U.S. market because of 
(1) an anticipated influx of machine tools into their domestic market when 
Spain joins the EC in 1984 and (2) declining sales in 1982 to Mexico, West 
Germany, and the Republic of South Africa. 2/ Another factor in this 
distribution structure change appears to be the amount of expertise required 
on the part of selling organizations because of the increasingly sophisticated 
nature of machine tools. 3/ 

Government involvement .—Spain's planned entry into the EC will give 
Spanish machine tool firms access to CNC and other components at lower costs 
because of the removal of tariffs on those components. 4/ Spain currently 
maintains protective tariffs on a number of machine tools, such as CNC lathes 
(maximum 24 percent), presses and metal-forming machines (maximum 18 percent), 
and milling and boring machines (maximum 14 percent). 


Taiwan 


Industry .—In 1981, there were 88 firms producing machine tools, each of 
which had exports of at least NT$10 million (US $272,500) for that year. 5/ 
Approximately 60 percent of Taiwan's machine tool builders are located in the 
Taichung province. 6/ 

Employment in the industry in 1982 totaled 10,770 workers, representing 
an increase from 9,069 workers in 1980 and 5,693 workers in 1977. In 1982, 
blue collar workers constituted 85 percent of the industry's employment, and 


1/ "Show Highlights Spain’s Exportables," American Machinist . December 1982, 
p. 25. 

2/ Bruce Vernyi, "Spain Tool Builders Bolster Their U.S. Sales 
Arrangements," American Metal Market , June 6, 1983, p. 5. 

3/ Ibid., p. 21. 

4/ Ibid., p. 5. 

5/ U.S. Department of State Telegram, American Institute in Taiwan Taipei, 
Taiwan, Mar. 17, 1983. 

6/ Shoji Imai, "'Latent trends' In the Taiwan's Machinery Industry," 
Metalworking Engineering & Marketing . November 1981, p. 81. 









91 


white collar workers, the remaining 15 percent. 1/ The average monthly 
earnings of a worker in 1982 totaled $303, after reaching a high point in 1981 
of $343 from $151 in 1977. 

In 1982, machine tool production was valued at $199.9 million, decreasing 
from $249.4 million in the previous year. 2/ During 1977-80, production 
increased dramatically, to $245.1 million in 1980 from $58.3 million in 1977. 
In terms of machine tool units, Taiwan’s production in 1981 totaled 556,571 
increasing from 181,701 in 1977. 3/ Similarly, during 1977-82, machine tool 
exports peaked in 1981 at $182.6 million, but decreased to $149.2 million in 
1982. Exports totaled $49.8 million in 1977. Imports were valued at $80.9 
million in 1982, but had peaked at $125.1 million in 1980. Imports increased 
steadily to $91.4 million in 1979 from $35.7 million in 1977. Consumption was 
valued at $131.6 million in 1982, declining from $191.9 million in 1980. 
Consumption was valued at $44.2 million in 1977. 

Exports as a share of production amounted to about 75 percent in 1982. 
During 1978-82, exports ranged from 72 to 74 percent of production. In 1977, 
however, exports constituted 85 percent of production. Imports as a share of 
consumption were 61 percent in 1982, and ranged from 59 to 65 percent during 
1978-82. 

Taiwan machine tool production appears to be concentrated in 
metal-cutting machine tools. In 1982, the ratio of metal-cutting to 
metal-forming machine tool production (based on value) was 18:1 and in 1981 
was 19:1, but in 1980, it was 31:1, and in 1979, about 27:1. However, in 
1977, the ratio was 6:1. 

In 1981, domestic manufacturers of machine tools accounted for 63.3 
percent of the total value of exports, trading companies accounted for 32.4 
percent, and the remainder, 4.4 percent, was accounted for by other 
manufacturers. 4/ In 1981, imported machine tools were sold through several 
distribution channels—’’indenting agents,” actually sales representives, 
accounted for about 55 percent of imported machine tool sales; distributors, 
for 25 percent; end users, purchasing directly from foreign manufacturers, 
about 15 percent; and the remaining 5 percent comprised sales to 
contractors. 5/ Engineers and contractors are occasional suppliers of machine 
tools, in that they are responsible for specifications and recommendations in 


1/ U.S. Department of State Telegram, American Institute in Taiwan, Taipei, 
Taiwan, Mar. 17, 1983. 

2/ Figures for production, exports, imports, and consumption are from 
American Machinist , February issues, 1979-83. 

3/ U.S. Department of State Telegram, American Institute in Taiwan, Taipei, 

Taiwan, Mar. 17, 1983. 

4/ Industrial Technology Research Institute, Brief Information on Machine 
Tools , Taiwan, (in Chinese), Apr. 1, 1982, p. 33. 

5/ Frost & Sullivan, Inc., Machine Tools & Accessories Market in Far East . 
New York, N.Y., March 1981, p. 161. 







92 


the acquisition of machine tools for new plants of user industries. 1/ At 
least in 1981, the quality and durability of machine tools were more important 
to domestic purchasers than were price and payment terms. 2/ Another 
important factor in the sales decision was the quality and type of services 
offered by agents and distributors, who normally provide a full range of 
application engineering services. 3/ The ’’distribution cost over and above 
the landed cost of the equipment” varies depending upon the distribution 
channel—usually 5 percent from indenting agents, about 30 percent from a 
distributor, and approximately 15 percent if the end user purchases direct 
from a foreign supplier. A/ Machine tool sales are promoted through 
advertisements in local newspapers and trade exhibitions. Advertisements 
typically appear in the major trade journal, Taiwan Machinery and Hardware 
Monthly , and the newspaper Economic Daily News . 5/ The annual trade fair, 
’’Taiwan Machinery Show,” is held in April or May. The show, organized by the 
China External Trade Development Council, has been exclusively for 
domestically manufactured products. However, the 1983 Taiwan Machinery Show, 
which generated $27 million in on-the-spot orders, was open to foreign 
machinery displays for the first time. 6/ 

Government involvement .—Over the past few years, the Government of 
Taiwan has realized the importance of the metalworking machine tool industry. 
The Government has used a number of avenues to promote the industry, including 
loans for capital investment, support and funding for research and 
development, promoting cooperation among Taiwan machine tool builders, 
nontariff barriers, and tax incentives. 

In January 1979, the Government of Taiwan initiated loans totaling 
$600 million to accelerate the rate of investment by machinery 
manufacturers. 7/ 

In 1982, the Government encouraged 1A major machine tool manufacturers to 
form the Taiwan Machinery Association, the aim of which was to raise the 
technical quality of the member firms' output. The association, also called 
the Precision Machinery Development Association of the Republic of China, 
expects the Government to assist in publicizing the symbol ”CMD” (’’Chinese 
Machinery Development”), appearing on Taiwan machine tools. The ”CMD” symbol 
signifies the product has met the standards set by the association and the 
Japan Machinery Institute. 8/ 

In July 1977, the Metal Industry Research Laboratory of the Industrial 
Technology Research Institute established the Machine Tools Center as a 
division of the laboratory with the objective of upgrading the technology of 


1/ Ibid., pp. 161-162. 

2/ Ibid., p. 161. 

3/ Ibid. 

A/ Ibid., p. 162. 

5/ Ibid. 

6/ ”FMS's Displayed at Taiwan Show,” American Machinist . June 1983, p. 33. 
7/ Kazushima Takahashi, ’’Brisk Taiwan Machine Tool Industry-NC-Oriented 
Segment Initiating A New Epoch,” Metalworking Engineering and Marketing . 
September 1979, p. 97. 

8/ ’’Taiwan’s Builders Seek Japanese Technical Aid,” American Machinist . 
April 1983, p. 31. 










93 


the country’s machine tool industry, including the establishment of a gear 
technology program. The Metal Industry Research Laboratory receives 
Government support. In March 1981, the total value of the facility was 
$120 mill ion, with another plant of 4,500 square meters to be completed in 
1983. 1/ In mid-1982, the laboratory was seeking to license production 
know-how for its milling- and drilling-machine controllers to domestic 
manufacturers. 2/ In June 1983, the Government-supported Mechanical Industry 
Research Laboratories (MIRL) was planning to license to local manufacturers 
for commercial production its know-how for an FMS station which can accomodate 
10 machines and up to 24 loading/unloading stations. The Lian Feng Machine 
Industries has been producing a horizontal machining center, which was 
developed by MIRL. 3/ 

The Government of Taiwan is also involved in protecting domestic 
manufacturers through mechanisms such as the mandatory condoning of joint 
ventures with foreign manufacturers. However, in June 1982, the Government of 
Taiwan rejected a proposal from the Japanese firm Fujitsu to establish a joint 
manufacturing venture in Taiwan in order to encourage the newly formed, local 
controller industry. Taiwan authorities stated that Fujitsu failed to ’’give 
sufficient guarantees of technology transfer to the local partner.” 4/ 

The Government of Taiwan exercises some of the more traditional nontariff 
barriers to trade in the area of machine tools. Although no import bans or 
import quotas are imposed on metalworking machine tools, import licenses are 
required. The licensing fee is 0.15 percent of the import value, as stated on 
the import permit. 5/ The Bureau of Foreign Trade initially tries to direct 
buyers who may seek to import to contact local metalworking machine tool 
manufacturers first. If the buyer can not obtain the machine desired, the 
local manufacturer referred to by the Bureau will issue an ”unable-to-make” 
certificate. With this certificate, the buyer can obtain an import license, 
but will not be eligible for the privilege of taking low-interest loans from 
public banks to finance the purchase. 6/ A qualified investor may take a 
10-percent tax deduction on an investment in machinery if it is imported, and 
a 15-percent deduction on the investment if the machinery is manufactured 
locally. 


Republic of Korea 

Industry .—By the end of 1982, there were approximately 70 firms in the 
Republic of Korea (Korea) manufacturing metalworking machine tools, employing 
about 15,000 factory workers. 7/ Korean machine tool production increased 
steadily during 1977-82, and by 1982, production totaled $200 million. In 

1/ Shoji Imai, ’’’Latent trends’ in the Taiwan’s Machinery Industry,” 
Metalworking Engineering & Marketing , November 1981, p. 82. 

2/ ’’Toward Home-Grown CNC for Taiwan,” American Machinist . June 1982, p. 49. 

3/ ”FMS Displayed at Taiwan Show,” American Machinist , June 1983, p. 33. 

4/ ’’Toward Home-Grown CNC for Taiwan,” American Machinist , June 1982, p. 49. 

5/ U.S. Department of State Telegram, American Institute in Taiwan, Taipei, 
Taiwan, Mar. 17, 1983. 

6/ Ibid. 

U U.S. Department of State Telegram, U.S. Embassy, Seoul, Korea, Mar. 11, 
1983. 









94 


1977, Korean production of machine tools was valued at $57 million. 1/ In 
1979, production totaled $163.7 million, a 72.3-percent increase over the 
previous year’s production of $95.0 million. 

During 1977-82, Korea had a negative balance of trade in metalworking 
machine tools. By 1982, imports were valued at $250 million, or $50 million 
more than domestic production; exports were valued at $65 million. In 1979, 
imports reached a peak of $397.6 million, or $233.9 million greater than 
domestic production. Exports in 1979 were valued at $14.9 million, a 
198-percent increase over the previous year’s exports of $5 million. In 
comparison, in 1977, imports of machine tools totaled approximately $130 
million, or $73 million more than domestic production. Exports were valued at 
$2 million. Exports as a share of domestic production increased to 32.5 
percent in 1982 from 19.6 percent in 1980 and 3.5 percent in 1977. 

By 1982, Korean consumption of machine tools was valued at $385 million; 
Korean consumption reached a peak of $546 million in 1979. In 1977, 
consumption totaled only $185 million. Imports as a share of consumption 
amounted to 64.9 percent in 1982, after reaching a peak of 76 percent in 1980, 
and were 70.3 percent in 1977. 

By the end of 1982, according to the Korea Machine Tool Industry 
Association, more than 50 types of machine tools, including parts, were being 
domestically produced. 2/ The types of metal-cutting machine tools produced 
include NC lathes, CNC lathes, machining centers, automatic deburring and 
tapping machines, grinding machines, horizontal boring and milling machines, 
shapers, auto cycle gear hobbing machines, and precision electrical discharge 
machines. The types of metal-forming machine tools produced locally include 
power and hydraulic presses, drop forging hammers, and a variety of shearing 
and bending machines such as press brakes and shearing machines, continuous 
shearing lines, and cold shearing and up-cut shearing machines. 3/ By the end 
of 1982, 23 firms were producing lathes, a major type of machine tool 
manufactured locally. Only one firm, Jin Young Precision Machine Co., Ltd., 
manufactured precision EDM’s. 

In 1979, a number of Korean machine tool builders had technical 
affiliations with foreign manufacturers, as seen in the following tabulation: 


1/ Figures for total production, consumption, imports, and exports are from 
American Machinist . February issues, 1979-83. 

2/ U.S. Department of State Telegram, U.S. Embassy, Seoul, Korea, Mar. 11, 
1983. 

3/ Ibid. 




95 


Korean Firm 

Hyundai International, 
Inc. 

Kia Machine Tool Co., 
Ltd. 

Dong Yang Machinery Co 

Chung Kong Sa Co., Ltd 


Product 

NC lathe; cylin¬ 
drical grinding 
machine. 

Special-purpose 
machine-cylin¬ 
drical blocks. 

Engine lathes- 


Milling machines- 


Foreign Firm 

Osaka Kiko Co., Ltd., 
(Japan) Cincinnati 
Milacron, Inc. (USA). 

Toyo Kogyo Co., Ltd., 
(Japan). 


Okuma Machinery Works, 
Ltd. (Japan). 

Howa Sangyo Co., Ltd. 
(Japan). 


Dae Young Industrial 
Co., Ltd. 


Centerless grind- Ohmiya Machinery 

ing machines. Co., Ltd. (Japan). 


In 1979, Daewoo was demonstrating an unmanned NC lathe which was combined with 
a Fuijitsu Fanuc industrial robot. 1/ By early 1981, most domestic firms had 
licensing agreements with foreign manufacturers. There were 16 licensing 
agreements for metal-cutting machine tools and two licensing agreements for 
metal-forming machine tool manufacture. 2/ In 1982, Daewoo International was 
marketing a CNC lathe with controls built by Fanuc Ltd. and which could be 
combined with a dedicated Fanuc robot for loading and unloading. 3/ 

In 1981, machine tools imported into Korea generally took the following 
distribution channels: sales offices of foreign companies, local ’’offering 
agents," Japanese trading companies, or Korean trading companies. 4/ The 
Korean Traders Association (KOTRA) and the Korea Society for the Advancement 
of Machinery Industry (KOSAMI) are major organizations for the promotion of 
machine tools for trade shows. For foreign manufacturers, experienced local 
agents are scarce. However, in 1982, the development of general trading 
companies was being promoted by the Korean Government. 5/ 

Government involvement .—In 1967, the Korean Government enacted the 
Machinery Industry Promotion Law. Then, in the 1970's, with the establishment 
of the Changwon Machinery Complex, large Korean firms such as Daewoo Heavy 
Industries, Ltd., and Lia Machine Tool Co. were founded and began 
manufacturing machine tools. 

In mid-1980, the Korean Government provided funds to promote the purchase 
of domestically produced machines. The Government’s program was designed to 


1/ Shoji Imai, "Korea International Exhibition of Machine Tools: KIMAT 

•79," Metalworking Engineering and Marketing, , September 1979, p. 106. 

2/ Frost & Sullivan, Inc., Machine Tools & Accessories Market in Far East . 
New York, N.Y., March 1981, p. 100. 

3/ Stuart Brown, "Daewoo Pushes for Share of US CNC Lathe Market," American 
Metal Market , Sept. 6, 1982, p. 10. 

4/ Ibid. 

5/ Ibid. 














96 


spur investment in plant and equipment on the part of the machinery industry. 
The Government initially allocated $88.9 million for national investment 
funds, $49.3 million for small- and medium-sized enterprises, and 
$65.8 million for industrial bank machinery industry funds. Another $164.6 
million was later added to the program. It is not known how much of these 
funds were received by the machine tool industry. 

In 1981, the Korean Government was providing a number of incentives to 
spur investment in machinery including tax credits, research and development 
assistance, grants, and preferential, low-cost financing. 1/ 

In 1981, foreign machine tools were required to receive a recommendation 
by the Fine Instruments Center (FIC) before being imported. The Fine 
Instruments Section of the Korean Ministry of Commerce and Industry 
established technical standards for certain types of precision machinery. The 
Korea Standards Association established certain other standards. 2/ Although 
not a standard, the metric system is universally used in Korea, and those 
machine tools with metric standards have an advantage in penetrating the 
Korean market. 3/ The Korean Government does require licenses for imports of 
foreign-made metalworking machine tools. In 1981, the granting of an import 
license was dependent on priority for defense-related products, products 
embodying high technology, a preference for U.S. or European products instead 
of those from Japan, and a preference for products manufactured for current or 
future licensing agreements and joint ventures. 4/ An import license was 
granted once the local agent presented the sales contract to the FIC and the 
contract was subsequently approved. A valid import license was required 
before letters of credit could be opened. 5/ 

In 1981, tariffs on machine tools ranged from zero to 20 percent, with no 
preferential import duties imposed for country of origin. 6/ Machine tools 
which were not produced locally in sufficient quantity, quality, and price 
were allowed to be imported duty free by major capital goods manufacturers. ]_/ 
In 1982, the Korean Government designated the metalworking machine tool 
industry as a strategic export industry. The current Korean Trade Plan, 
covering the period July 1, 1982, to June 30, 1983, specifies that most 
imports of metalworking machine tools are subject to recommendation of the 
Korea Machine Tool Industry Association. 8/ The imports covered consist of 69 
subitems of the Customs Cooperation Council Nomenclature 84.45 category. 

The Korean Government’s targets for the metalworking machine tool 
industry in 1986 include production valued at $950 million and exports 


1/ Frost & Sullivan, Inc., Machine Tools & Accessories Market in Far East . 
March 1981, p. 104. 

2/ Frost & Sullivan, Inc., Machine Tools & Accessories Market in Far East . 
New York, N.Y., March 1981, pp. 97, 105. 

3/ Ibid, p. 98. 

4/ Ibid., p. 97. 

5/ Ibid. 

6/ Ibid. 

7/ Ibid. 

8/ U.S. Department of State Telegram, U.S. Embassy, Seoul, Korea, Mar. 11, 
1983. 





97 


(including metal-forming machinery) totaling $550 million, or 57.9 percent of 
production. Sixty percent of the machine tools in use by Korean industry are 
to be domestically produced. 1/ Planned exports (by value) for 1986 include 
150 million dollars' worth of lathes, 60 million dollars’ worth of milling 
machines, 20 million dollars’ worth of drilling machines, and 170 million 
dollars' worth of other machine tools. 2/ 


Factors of Competition 

Inventories 

Respondents to the Commission's survey of machine tool purchasers in the 
U.S. marketplace revealed that shorter delivery time was less important in the 
purchase of a U.S.-made machine tool vis-a-vis the purchase of a foreign-made 
machine tool. 

The large inventories of foreign-made, especially Japanese, machine tools 
has had an impact on the entire U.S. machine tool market. When U.S. demand 
for machines tools became severely depressed in late 1981 and throughout 1982, 
the large inventories of foreign-made machine tools led to price-cutting, with 
manufacturers' discounts of 15 percent being commonplace. 3/ As a result, the 
profitability of U.S. manufacturers suffered. 

Markets in Singapore, Taiwan, and Western Europe also suffered from price 
cutting due to large Japanese inventories. The presence of larger inventories 
of new, foreign-made, machine tools in the U.S. market also disrupted the 
market for used machine tools. Although it had never been significant, this 
market grew during 1980-82 because of the large number of repossessions of 
machine tools due to the heavy impact of the recession on job shops and 
general manufacturing. Both the market value and the collateral value of 
these repossessed machine tools declined in light of the increased inventories 
of foreign-made machine tools. 4/ 

In late 1979 and early 1980, Japanese machine tool builders and trading 
companies established a number of centers for stockpiling machine tools in 
both the United States and Europe. 5/ These centers were built, in part, to 
reduce the delivery time of Japanese machine tools. In June 1980, for 
instance, a Japanese trading company had in its stockyard center in Chicago 
inventories worth some $3 million, or about a 2-raonth supply. 6/ 

The buildup in the United States of Japanese machine tools paralleled the 
growing inventories in Japan of the same products. In 1980, Japanese machine 


1/ Ibid, citing the Korean Ministry of Commerce and Industry. 

2/ Ibid. 

3/ J.D. Kidd and Minoru Inaba, "Japan Machine Tool Inventories In U.S. 
Growing, Discounts Offered," American Metal Market . July 19, 1982, p. 22. 

4/ "Creditors Are Loaded with Machine Tools," Business Week , 

Oct. 18, 1982, p. 47. 

5/ "European Machine Tool Stocking Center is Eyed," Japan Economic Journal . 
June 17, 1980, p. 8. 

6/ Ibid. 







98 


tool builders had inventories in Japan of 1,191 NC lathes and machining 
centers, which were valued at approximately $78 million. This was a 
32.5-percent increase in value over 1979 inventories for NC lathes and a 
38.1-percent increase for machining centers. 1/ In 1980, approximately 90 
percent of all machine tool inventories in Japan were NC lathes and machining 
centers. 2/ 

According to a 1982 survey by the Japan Machine Tool Builders’ 
Association, of the 3,878 NC lathes and 2,180 machining centers shipped to the 
United States in 1980, 2,500 and 1,000, respectively, were considered to be in 
inventory. 3/ By the end of 1982, estimates of unsold Japanese machine tools 
in the United States ranged from 5,000 to 10,000 units, worth up to $500 
million. 4/ 

The Commission’s survey of U.S. importers of metalworking machine tools 
indicated that as of December 1982, there were 5,246 machine tools in 
inventory in the United States, 409 of which were NC lathes and 305 of which 
were machining centers. 5/ Responses to the Commission's survey accounted for 
43 percent of imports, by value. If the ratio of machine tools in inventory 
to imports (by value) were applied to 100 percent of imports, the number of 
machine tools in inventory would be 12,223. 6/ 


Raw Materials, Capital, and Labor Availability and Cost 

The bulk of raw materials consumed in the manufacture of machine tools 
are iron, steel, aluminum, and copper. Ferrous metals are being slowly 
replaced by composites, TJ which will be increasingly used as a cost-saving 
measure in the future. Other materials include paint, oil, and rubber. The 
1977 Census of Manufactures reported the cost of materials to the metalworking 
machine tool industry to be about 38 percent of the value of shipments 
reported by the Bureau of the Census for 1977. Although little information is 
available on the cost of these raw materials to foreign producers, U.S. 
producers who have studied foreign machine tool industries are of the opinion 
that raw-material costs are relatively equal throughout the world. However, 
there are other costs, such as wages, fixed overhead, and financing, all of 
which vary significantly between countries. 


1/ ’’Market Trends of Machine Tool Inudstries,” Digest of Japanese Industry & 
Technology (DJIT) . Japan Trade & Industry Publicity, Inc., Tokyo, Japan, No. 
164, 1981, p. 28. 

2/ J.D. Kidd and Minoru Inaba, op. cit., p. 22. 

3/ Minoru Inaba, "Japan’s Massive Tool Stocks," American Metal Market . June 
28, 1982, p. 1. 

4/ John A. Byrne, "Industrial Equipment and Serives," Forbes . Jan. 3, 1983, 
p. 130. 

5/ Compiled from data submitted in response to questionnaires of the U.S. 
International Trade Commission. 

6/ Estimated by the staff of the U.S. International Trade Commission, based 
on questionnaire responses. 

TJ Composites are blends of different types of materials that tend to be 
stronger, lighter, and more resistant to temperature extremes than any of 
their component materials alone. 








99 


Wages, including supplementary benefits, paid to production workers are 
estimated to be higher in West Germany and Switzerland than in the United 
States; wages in all other major producing countries are estimated to be lower 
than those earned in the United States. 1/ Wages paid to production workers 
in France, Italy, Japan, and the United Kingdom are, on average, two-thirds of 
those paid to production workers in the United States. The difference in 
wages paid to white collar workers is even greater. Engineers in the United 
States with 1 year of experience earn approximately twice that of their 
Japanese counterparts and four times that of Taiwan and Korean 
engineers. 2/ The higher wages in West Germany, Switzerland, and the United 
States, as compared to other machine-tool-producing countries, generally 
contribute to higher costs of production, which may have a significant effect 
on the competitiveness of these countries in the world market for metalworking 
machine tools. 

Historically, it has been difficult for the U.S. machine tool industry to 
generate capital. The cyclical nature of the industry due to the instability 
of the market has made it difficult for machine tool producers to attract 
external equity or debt financing. Since machine tool companies’ profits are 
generally on par with those of other manufacturing industries during upswings 
and much worse during downturns, and since the majority of U.S. companies are 
small and privately held, few financial institutions are willing to assume the 
risk for such a low return on their investment. Debt-to-equity ratios in the 
U.S. industry are typically below 50 percent. Profits earned in good years 
are generally held as a buffer for the downside of the cycle, when capital is 
needed to retain as many skilled workers as possible and so companies may 
undertake whatever capital improvements are deemed necessary. 

The ability to generate capital in foreign industries does not appear to 
be so burdensome. Japanese debt-to-equity ratios have been reported to range 
from 150 to 560 percent. 3/ Thus, the typical Japanese machine tool company 
has much easier access to capital than its American counterpart and the risks 
associated with capital expansion and investments are, in effect, assumed by 
the lending agency. The relative ease of capital investments also gives 
Japanese machine tool companies the ability to maintain a highly skilled 
workforce even in times of weak demand. In comparison, debt-to-equity ratios 
in the EC range from 30 to 120 percent, thus allowing some EC countries the 
advantages over the typical U.S. manufacturer that are also enjoyed by 
Japanese companies (see country profiles section for further discussions of 
Government involvement in the machine tool industry). 


Technology Level 


Manufacturing; technology 

Manufacturing technology in the machine tool industry is constantly 
changing. The advent of NC and CNC and constant advances in cutting tool 
materials, machine tool design, measurement and sensing devices, tool 

1/ U.S. Department of Labor, Bureau of Labor Statistics. 

2/ Asian Wall Street Journal Weekly , Jan. 10, 1983, p. 11. 

3/ George P. Sutton, ’’Trip Report on the Technology of Machine Tools in 
Japan,” Machine Tool Task Force , Lawrence Livermore, National Laboratory, 
February 1980. 






100 


changing, workpiece handling, and workpiece materials have made it difficult 
for even the most modern, sophisticated machine tool company to keep abreast 
of technology developments. 1/ The emerging technologies of computer-aided- 
design and computer-aided-manufacture are beginning to play an important role 
in the competitiveness of machine tool companies. Machine tool builders who 
now utilize CAD/CAM techniques in their own manufacturing operations are 
obviously in a more favorable competitive position than those who do not. 2/ 

Much of the technology used today in the machine tool industry (i.e., 
numerical control, measurement and inspection technology, CAD/CAM, laser 
technology, and similar high-technology features) was developed outside the 
industry. In order to keep pace with technological advances of primary 
importance in both the manufacturing process and the end product, some machine 
tool companies have been acquiring interests in high-technology firms which 
provide expertise in these areas. 3/ However, the diffusion of new technology 
in the machine tool industry has generally been slow. 4/ One reason for this 
may be the relative lack of capital of U.S. machine tool builders, compared 
with that of foreign machine tool builders. 

One barometer of the diffusion of manufacturing technology in the U.S. 
machine tool industry is the number of NC machine tools in use in machine tool 
plants. A study by the U.S. Army in 1978 revealed that of a sample of 25 
percent of all U.S. manufacturing companies with 20 or more production 
workers, only 4 percent of the machine tools in use were numerically 
controlled. Data submitted in response to the Commission’s questionnaire to 
U.S. producers of machine tools indicate that in 1982, NC machine tools 
accounted for 10 percent of all machine tools currently in use in 
machine-tool-manufacturing facilities. Of these, 39 percent are 4 years old 
or less; 26 percent are 5 to 9 years old; 31 percent are 10 to 19 years old; 
and 4 percent are 20 years old or more. The number and ages of machines in 
use by U.S. producer respondents as of December 1982 are shown in table 28. 


Table 28.—Metalworking machine tools: Machines in use by U.S. producers 

of machine tools, by ages, as of Dec. 31, 1982 

(In units) 


Age Numerically controlled All other Total 


0 to 4 years-: 660 : 1,104 : 1,764 

5 to 9 years-: 442 : 1,528 : 1,970 

10 to 14 years-: 518 : 4,051 : 4,569 

20 years and over-:_ 66 : _ 8.706 : _ 8.772 

Total-: 1,686 : 15,389 : 17,075 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


1/ Commission staff interviews with industry executives. 

2/ Ibid. 

3/ American Metal Market/MetalworkinK News . Jan. 31, 1983, p. 1. 

4/ The Competitive Status of the Machine Tool Industry . National Academy 
Press, Washington, D.C., 1983, p. 25. 


















101 


Of the conventional-type machine tools in use in U.S. machine tool plants 
in 1982, 7 percent were 4 years old or less, 10 percent were 5 to 9 years old, 
26 percent were 10 to 19 years old; and 57 percent were 20 years old or more, 
according to 140 domestic producers responding to the Commission's survey. 

A recent innovation which is already of benefit to machine tool producers 
is CAD/CAM, which eliminates the need to define every point along the path of 
a cutting tool as is necessary with standard NC and CNC programming. The part 
is designed through a cathode ray tube (CRT) by entering information through a 
keyboard. The computer performs the complex mathematical operations and 
produces graphics, which eliminates the need for conventional engineering 
drawings. The computer retains all data for each part designed, and the 
graphics for each part may be recalled and redesigned at will. The programmer 
keys in data for tool selection, speed, feed rates, and similar information. 
The computer then generates the tool path, which is checked by the operator 
and, if acceptable, the computer generates the NC tape for producing that 
particular part. 

A more recent development which holds promise for the industry is 
distributed numerical control. This process electronically links the CAD/CAM 
system directly to the NC machine tool, which eliminates the need for punched 
paper tapes and allows for easier and faster editing of machinery operations. 
Distributed numerical control is a further step toward automated 
manufacturing. With a CAD/CAM system electronically linked to NC machine 
tools, robots for loading and off-loading, automated conveyors for workpieces, 
and automated inventory control, repetitive machining operations can be 
carried out with limited worker intervention. 

CAD/CAM systems are integral to Flexible Manufacturing Systems. FMS’s 
consist of one or more computer-controlled machine tools, other machinery for 
testing and inspection, automated material-handling systems, and a central 
computer for controlling this equipment. FMS's are designed to produce a 
family of diverse parts in batches. Although significant cost benefits are 
realized with flexible manufacturing systems, there is a large initial 
investment that has precluded its widespread use. 

In the United States, only the largest machine tool manufacturers use 
CAD/CAM. 1/ However, Commission staff interviews with machine tool company 
executives in connection with this study revealed that intermediate-sized 
firms are beginning to realize the value of CAD/CAM to their operations. Most 
industry representatives expressed a desire to acquire CAD/CAM capability not 
only for in-house use in producing machine tools, but also for the experience 
with such a system that will help them market more effectively to 
sophisticated users of total manufacturing systems. Two producers had 
recently installed CAD/CAM and were still learning its uses. There are 
approximately 30 FMS’s operating in the United States, but only a few of these 
are in use in the machine tool industry. 2/ 


1/ U.S. Department of Labor, Technology and Labor in Four Industries . Jan. 
1982, p. 22. 

2/ U.S. Industrial Outlook , 1983, p. 20-5, and the NMTBA. 





102 


In Japan, there are approximately 250 FMS’s currently in operation, with 
about 10 of these in use in the machine tool industry. 1/ 2/ In addition, one 
Japanese machine tool producer has established a flexible manufacturing 
factory in the United States. The average number of machine tools in a 
typical Japanese FMS is seven, most of which are machining centers. The 
number of different parts produced varies from 4 to 3,000, and lot sizes vary 
from 3 to 300. FMS’s range in cost from $2 million to $8 million. 3/ 

At a recent American Products Fair in Sapporo, Japan, staged by the 
American Consulate, U.S. CAD/CAM and Office Automation companies received $2 
million in orders from Japanese companies. In addition, four sales agreements 
were concluded, and five were under negotiation. Funds for the fair were 
provided by the exhibiting U.S. companies, a subsidy from the Manufactured 
Imports Promotion Organization, which is under MITI, and from advertisements. 
In addition, the space for the show was provided rent free by the Keio Plaza 
Hotel. No U.S. Government funds were expended to put on this show. 4/ 

In Western Europe, the total number of flexible manufacturing systems in 
current use is estimated at 25. 5/ Machine tool companies that utilize FMS 
are believed to be fewer than 10. West Germany has a Government-financed 
project for CAD/CAM research, development, and implementation. In most other 
countries, research and development on FMS is coordinated by commercial 
interests supported by government funding. 6/ A report by the United States 
Machine Tool Task Force in 1980 stated that the West German machine tool 
builders may be ahead of U.S. machine tool builders in some areas of 
FMS. U The Western European market for CAD/CAM is expected to reach 
$1.6 billion by 1987. 8/ The number of machine tool producers using CAD/CAM 
can be expected to increase as applications for its use increase and the cost 
of installing such systems decreases. 

In Eastern Europe and the Soviet Union, CAD/CAM development was not begun 
until the 1970*s. There are approximately 25 FMS’s in operation in these 
areas. 9/ The Governments of these countries have backed considerable efforts 
toward CAD/CAM research, with the impetus for these efforts based on rapid 
industrial expansion and a chronic labor shortage. 10 / 

According to industry sources, the Japanese and U.S. machine tool 
producers are on equal ground when considering the technology of flexible 
manufacturing systems. Where the Japanese have an advantage is in practical 
experience in using FMS’s, because there are so many more in operation in 
Japan than in the United States. This gives the Japanese firms an advantage 
in terms of the application of FMS, which could prove to be a significant 


1/ American Metal Market/Metalworking; News . Nov. 15, 1982, p. 7. 
2/ Industrial Review of Japan/1982 . March 1982, p. 97. 

3/ American Machinist . Nov. 1981, p. 212. 

4/ Department of State Airgram, Mar. 5, 1983. 

5/ American Machinist . Nov. 1981, p. 213. 

6/ Ibid. 

7/ Iron Age , Nov. 24, 1980, p. 119. 

8/ American Machinist . Apr. 1983, p. 43. 

9/ American Machinist , Nov. 1981, p. 218. 

10/ Ibid., p. 215. 










103 


advantage in terms of market penetration. West Germany, however, may be ahead 
of the United States in terms of automatic tool control and actual cutting 
time of the tool in the FMS field. 1/ 


Product technology 

The product technology of U.S. machine tool producers is generally held 
to be internationally competitive. 2/ For certain products the United States 
has superior technology, simply because U.S. producers have concentrated on 
the development of these products. These include large, sophisticated NC 
machine tools for use in the production of aircraft, military equipment, and 
other specialized products. Foreign producers, for the most part, are not 
competitive in these markets. 

The market for small- and medium-sized NC machine tools is a different 
matter. The Japanese producers, in particular, have concentrated production 
efforts in the area of standard NC machine tools. 3/ The markets for these 
types of machine tools consist of appliance and machinery manufacturers, along 
with small job shops that supply parts to these and other industries. The 
competition among Japanese producers of NC machine tools in the mid-1970’s and 
the decreasing cost of NC control units led to significant price reductions 
for these machines. 4/ The resulting attainment of economies of scale in the 
production of standard NC machine tools such as turning machines and machining 
centers and thus, the low selling price, coincided with a significant surge in 
demand for these machine tools in the United States in the late 1970's. 
Retooling in the automobile and aerospace industries, along with oilfield 
goods producers, was expanding, and the job shops which supply these 
industries were demanding standard NC machine tools. At the same time, U.S. 
producers were showing little interest in this market and continued to produce 
the large, sophisticated machine tools for specialized use. 5/ Since that 
time, however, a few U.S. producers have started producing competitive machine 
tools to serve this market. 6/ 

In certain categories of machine tools, different countries have the 
leading technology because they have concentrated on the development of these 
products. In a 1982 survey, U.S. purchasers of both U.S.-made and 
foreign-made machine tools were asked to rate producers regarding the 
engineering of their products. 7/ Purchasers rated U.S. producers only 
slightly higher than Japanese and West German producers. 8/ Other producing 
countries rating much lower than the top three included the United Kingdom, 
Italy, France, and Taiwan. It appears from this survey that U.S. producers 


1/ Iron Age . Nov. 24, 1980, pp. 119 and 120. 

2/ The Competitive Status of the U.S. Machine Tool Industry . National 
Academy Press, Washington, D.C., 1983, p. 67. 

3/ Industrial Review of Japan/1982 , March 1982, p. 91. 

4/ Ibid. 

5/ American Machinist , September 1979, p. 116. 

6/ Industry Week , Aug. 9, 1982, pp. 46 and 48. 

7/ Hitchcock Marketing and Research Services, Three Views of Machine Tool 
Marketing, Dec. 1982. 

8/ Ibid. 









104 


have a slight overall edge in product technology over their foreign 
competitors, at least in the U.S. market. However, when the machine tool 
categories were broken down into types of machine tools used, U.S. products 
were rated first and Japanese products second in the metal-cutting category, 
and vice versa in the metal-forming category. When U.S.-made machine tools 
and foreign-made machine tools were compared by industries using these 
products, U.S.-made machine tools were rated first among SIC’s 34 (fabricated 
metal products), 35 (machinery, except electrical), and 36 (electrical 
machinery), and Japanese-made machine tools were rated first among SIC's 30 
(rubber and miscellaneous plastics products), 38 (instruments and related 
products), and 39 (all other durable goods). German-made machine tools were 
rated first in SIC 37 (transportation equipment), and Taiwan machine tools 
were rated first in SIC 33 (primary metals). 


Product Quality 

In the Commission's survey of U.S. purchasers of both domestic and 
foreign-made machine tools, respondents indicated that performance features 
were less significant factors in the purchase of a U.S.-made machine tool 
vis-a-vis the purchase of a foreign-made machine tool. Table 29 lists the 
factors considered in the Commission’s survey and ranks them in order of their 
importance to domestic purchasers. 


Table 29.—U.S.- and foreign-made machine tools: U.S. purchasers* reasons 

for purchases, 1980-82 


Reason for purchase 

U.S.-made 

machine tools 

Foreign-made 
machine tools 

Availability of spare parts- 

1 

8 

Compatibility with existing systems- 

2 

7 

Servicing/training- 

3 

6 

Availability- 

4 

5 

Lower purchase price (delivered)- 

5 

1 

Supplier relationship- 

6 

10 

Shorter delivery time- 

7 

2 

Superior design-*- 

8 

3 

More durable- 

9 

10 

Higher productivity (man-hour output ratio)— 

10 

4 

Ability to add to or upgrade machine tool 
capability- 

11 

8 

Favorable warranties- 

12 

9 

Less maintenance- 

13 

7 

Changeover time (for different production 
runs)- 

14 

11 

Energy efficiency- 

15 

15 

Favorable financing terms- 

16 

12 

Lower installation costs- 

16 

14 

A 11 other- 

17 

13 


Source: Compiled from data submitted in response to questionnaires of the 


U.S. International Trade Commission. 

























105 


Purchasers responded that overall, in their opinion, foreign-made machine 
tools are better designed than U.S.-made machine tools, have higher 
productivity, and require less maintenance. U.S.-made machine tools were 
rated as slightly more durable than foreign-made products. 

U.S. machine tool builders have generally concentrated on production of 
specialized types of machine tools for the machinery and fabricated-metal 
products industries, as well as the transportation industry. As a result, 
purchasers in these industries have indicated that U.S.-made machine tools are 
superior to foreign-made machine tools. 1/ 


Product Price 

Domestic purchasers indicated in Commission questionnaires that a lower 
delivered purchase price was the most important reason for buying a 
foreign-made machine tool and of somewhat less importance when buying a 
domestically made machine tool. U.S. producers and importers submitted 
information in Commission questionnaires on shipments (by value and quantity) 
of numerically controlled lathes and machining centers. Included in the 
responses was information on horizontal spindle NC lathes with a rated 
horsepower of less than 25 and over 50; vertical spindle NC lathes and 
vertical spindle machining centers with a Y-axis travel of less than 20 inches 
and over 26 inches; and horizontal spindle machining centers with a Y-axis 
travel over 40 inches. 2/ 

Tables 30-33 show the average prices of these machines for U.S. domestic 
and export shipments and U.S. imports and importers’ shipments. 


Table 30.—Numerically controlled lathes: Average price of U.S. 

domestic shipments, by types, 1977-82 


Horizontal spindle 


Year 

Rated less than 
25 horsepower 

Rated over 50 
horsepower 

Vertical spindle 

1977- 

$64,596 

$190,332 

$224,390 

1978- 

72,192 

185 ,457 

274,290 

1979- 

55,790 

192,872 

271,437 

1980- 

90,514 

239,612 

263,948 

1981- 

130,890 

276,226 

342,504 

1982- 

110,020 

343,111 

386,488 


Source: Compiled from data submited in response to questionnaires of the 

U.S. International Trade Commission. 


1/ Industry Week . Aug. 9, 1982, p. 47, and American Machinist , September 
1979, p. 117. 

2/ It should be noted that information was provided for specific categories 
of metalworking machine tools and the reported values of shipments for U.S. 
producers and importers do not necessarily represent comparable products. 
Product variation may occur from one year to the next for one producer or 
importer. 


















106 


Table 31.—Numerically controlled lathes: Average price of U.S. export 

shipments, by types, 1977-82 


Year 

Horizontal spindle 

Vertical spindle 

Rated less than 
25 horsepower 

Rated over 50 
horsepower 

1977 

$46,211 

$238,667 

$256,231 

1978 

49,808 

204,250 

134,678 

1979 

59,792 

203,071 

347,313 

1980 

79,879 

259,647 

400,200 

1981 

102,970 

280,690 

252,143 

1982 

85,200 

368,278 

483,900 


Source: Compiled from data submited in response to questionnaires of the 

U.S. International Trade Commission. 


Table 32.—Numerically controlled lathes: Average price of U.S. imports, 

by types, 1977-82 


Year 

Horizontal spindle 

Vertical spindle 

Rated less than : 

25 horsepower : 

Rated over 50 
horsepower 

1977 

$49,201 : 

$100,633 

$67,071 

1978 

61,837 : 

113,410 

98,767 

1979 

67,141 : 

140,291 

72,615 

1980 

66,739 : 

142,977 

195,379 

1981 

73,573 : 

156,475 

159,528 

1982 

65,480 : 

151,755 

209,396 


Source: Compiled from data submitted in response to questionnaires of the 
U.S. International Trade Commission. 


Table 33.—Numerically controlled lathes: Average price of U.S. importers’ 

shipments, by types, 1977-82 


Year 

Horizontal spindle 

Vertical spindle 

Rated less than 

25 horsepower : 

Rated over 50 
horsepower 

1977- 

$62,249 : 

$134,747 

$93,125 

1978 

72,516 : 

147,442 

127,292 

1979 

80,579 : 

172,387 

72,000 

1980 

86,364 : 

174,240 

136,875 

1981- 

97,962 : 

199,604 

224,146 

1982 

89,019 : 

209,644 

262,814 


Source: 

U.S. International Trade Commission. 











































107 


U.S. producers’ average prices of domestic shipments of horizontal 
spindle NC lathr.s rated less than 25 horsepower increased from $64,596 in 1977 
to $72,192 in 1978, decreased to $55,790 in 1979, increased to $130,890 in 
1981, and decreased to $110,020 in 1982. The 1981 average price increased 103 
percent over the 1977 average price and the 1982 average price was 16 percent 
below the 1981 average price. The average price of U.S. producers' export 
shipments of horizontal spindle NC lathes rated less than 25 horsepower 
increased from $46,211 in 1977 to $102,970 in 1981, or by 123 percent, and 
decreased to $85,200 in 1982, or by 17 percent. The average price of U.S. 
imports of horizontal spindle NC lathes rated less than 25 horsepower 
increased from $49,201 in 1977 to $67,141 in 1979, decreased to $66,739 in 
1980, increased to $73,573 in 1981, and decreased to $65,480 in 1981. The 
1981 average price was 50 percent higher than the 1977 average price and 11 
percent higher than the 1982 average price. The average price of U.S. 
importers’ shipments of horizontal spindle NC lathes rated less than 25 
horsepower increased from $62,249 in 1977 to $97,962 in 1981, or by 57 
percent, and decreased to $80,019 in 1981, or by 9 percent. 

The average price of U.S. producers' domestic shipments of horizontal 
spindle NC lathes rated over 50 horsepower increased erratically from $190,332 
in 1977 to $343,111 in 1982 (80 percent) and the average price of export 
shipments increased 54 percent from $238,667 in 1977 to $368,298 in 1982. The 
average price of U.S. imports of horizontal spindle NC lathes rated over 50 
horsepower increased from $100,633 in 1977 to $156,475 (55 percent) and 
decreased to $151,755 in 1982 (3 percent). U.S. importers’ shipments 
increased in average price from $134,747 in 1977 to $209,644 in 1982, a 56 
percent increase. 

The average price of U.S. domestic shipments of vertical spindle NC 
lathes increased erratically from $243,390 in 1977 to $386,488 in 1982 (72 
percent) and the average price of export shipments increased from $256,231 in 
1977 to $483,900 in 1982 (89 percent). The average price of U.S. imports of 
vertical spindle NC lathes increased from $67,071 in 1977 to $209,396 in 1982 
(212 percent) and the average price of U.S. importers' shipments increased 
from $93,125 in 1977 to $262,814 in 1982 (182 percent). 

Tables 34-37 show the average prices of U.S. domestic and export 
shipments and the average prices of U.S. imports and importers' shipments of 
certain machining centers during the period 1977-82, as reported by 
questionnaire respondents. 


108 


Table 34.—Machining centers: Average price of U.S. domestic shipments, 

by types, 1977-82 


Vertical spindle 


Year 

Y-axis travel less 
than 20 inches 

Y-axis travel 
over 26 inches 

Y-axis travel 
over 40 inches 

1977- 

$57,244 

$140,295 

$336,894 

1978- 

59,674 

142,623 

459,067 

1979- 

65,927 

150,953 

539,347 

1980- 

73,761 

163,200 

522,887 

1981- 

80,857 

178,211 

619,238 

1982- 

85,263 

197,743 

706,670 


Horizontal spindle, 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


Table 35.—Machining centers: Average price of U.S. export shipments, 

by types, 1977-82 


Vertical spindle 

Horizontal spindle, 
Y-axis travel 
over 40 inches 

xear 

: Y-axis 

: than 

travel less 

20 inches 

Y-axis travel 
over 26 inches 

1977 

$29,667 

$156,667 

$390,333 

1978-: 

59,292 

287,091 

399,875 

1979 

72,239 

182,933 

555,833 

1980 : 

76,288 

182,483 

810,500 

1981 

71,161 

203,333 

637,000 

1982 - - 

103,289 

203,000 

741,000 


Source: Compiled from data submitted in response to questionnaires of the 


U.S. International Trade Commission. 




























109 


Table 36.—Machining centers: Average price of U.S. imports, 

by types, 1977-82 


Year 

Vertical spindle 

Horizontal spindle, 
Y-axis travel 
over 40 inches 

Y-axis travel less 
than 20 inches : 

Y-axis travel 
over 26 inches 

1977 

$60,010 : 

$116,000 

1/ 

1978 

75,405 : 

121,857 

$158,000 

1979 

77,301 : 

120,800 

162,750 

1980 

75,800 : 

114,667 

307,438 

1981 

77,390 : 

198,253 

320,828 

1982 

74,059 : 

194,123 

306,091 


1/ Respondents to the Commission’s survey reported no imports of this 
machine tool in 1977. 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


Table 37.—Machining centers: Average price of U.S. importers’ shipments, 

by types, 1977-82 


Vertical spindle 

Horizontal spindle, 
Y-axis travel 
over 40 inches 

rear „ 

: Y-axis 

: than 

travel less 

20 inches 

Y-axis travel 
over 26 inches 

197 7 

$53,368 

$138,000 

1/ 

1978-: 

88,649 

144,857 

$193,000 

1979-: 

88,928 

140,100 

197,667 

1980-: 

86,993 

135,667 

362,272 

1981-: 

91,329 

224,697 

313,389 

1982-: 

91,146 

232,783 

398,833 


1/ Respondents to the Commission's survey reported no imports of this 
machine tool in 1977. 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


The average price of U.S. domestic shipments of vertical spindle machining 
centers with Y-axis travel of less than 20 inches increased 49 percent from 
$57,244 in 1977 to $85,263 in 1982. The average price of U.S. export 
shipments increased, except in 1981 when there was a slight decrease, from 
$29,667 in 1977 to $103,289 in 1982, or by 248 percent. The average price of 
U.S. imports of vertical spindle machining centers with Y-axis travel of less 
than 20 inches increased erratically from $60,010 in 1977 to $77,390 in 1981 
and decreased to $74,059 in 1982. The average price of U.S. importers’ 
shipments followed the same pattern, increasing erratically from $53,368 in 
1977 to $91,329 in 1981, and decreased slightly to $91,146 in 1982. 




























110 


The average price of U.S. producers’ domestic shipments of vertical 
spindle machining centers with Y-axis travel over 26 inches increased 41 
percent during 1977-82 while the average price of export shipments increased 
30 percent. The average prices of imports and importers’ shipments, during 
the same period, increased 67 percent and 69 percent, respectively. 

The average price of U.S. domestic shipments of horizontal spindle 
machining centers with Y-axis travel over 40 inches increased erratically from 
$336,894 in 1977 to $706,670 in 1982. The average price of U.S. exports of 
this type machine tool increased from $390,333 in 1977 to $810,500 in 1980, 
decreased to $637,000 in 1981, and increased to $741,000 in 1982. U.S. 
importers responding to the Commission’s survey reported no imports or 
shipments of horizontal spindle machining centers with Y-axis travel over 40 
inches in 1977. During 1978-81, the average price of imports of these types 
of machines increased from $158,000 to $320,828, and decreased to $306,091 in 
1982. The average price of U.S. importers* shipments increased from $193,000 
in 1978 to $362,272 in 1980, decreased to $313,389 in 1981, and increased to 
$398,833 in 1982. 

For specific types of machine tools, U.S. producers took immediate steps 
in reducing the price of their products once they realized that imported 
machine tools were capturing an increasing share of the market. 1/ Additional 
steps taken include standardization of parts, assembly line production, 
increased versatility of the machine tool, and the elimination of special 
accessories as standard equipment. The results have been better quality 
machine tools at competitive prices. 2/ 

In addition, some U.S. producers are starting production of certain 
machine tools for markets they had previously neglected. These machine tools 
are standard, instead of custom products, and are designed to be price 
competitive with foreign-made products. Some U.S. producers have even begun 
producing some standard machine tools for stock. The high-volume production 
may not only lower the price of these tools, but may also shorten delivery 
times. 3/ Despite these recent developments, U.S. machine tool producers are 
still claiming that sales have been lost to foreign competitors due to price. 
For example, one prominent U.S. manufacturer allegedly lost a bid to a 
distributor of foreign made machine tools for a 15-inch, CNC, universal lathe 
for the U.S. Naval Regional Contracting Center. The U.S. producer’s bid was 
2.5 times over that of the foreign competitor’s. In another instance, a 
United States firm allegedly lost sales of over $6.5 million over a period of 
a few years to foreign competition due to price; the majority of this business 
was lost to a single foreign producer. 4/ 

One major Japanese machine tool producer has established a show place in 
California, complete with a lobby, bar, amphitheatre (100 seats), Japanese 
garden and pool (with retractable roof), restaurant, showroom demonstration 
floor, conference room, and 36-hole golf course. 5/ This company allegedly 

1/ Industry Week . Aug. 9, 1982, p. 46. 

2/ Ibid, and Business Week . Oct. 5, 1981, p. 27. 

3/ Commission staff interviews with machine tool manufacturers. 

4/ Information submitted by U.S. producers in response to questions about 
lost sales. 

5/ Iron ARe, Nov. 1, 1982. 






Ill 


has one pricing strategy for first-time buyers and another for repeat buyers. 
Reportedly, first-time buyers are offered progressively lower prices until 
they place an order, whereas repeat orders are accepted at full list price. 1/ 
The Japanese company is also reportedly setting up a program to place NC 
lathes into U.S. companies on a no-charge consignment basis. 2/ 


Marketing 

The manner in which a machine tool reaches the end user depends typically 
on the degree to which it is designed to the end user's specifications. 

Highly specialized machines are sold primarily direct to the end user, whereas 
the more standard production machine tools are sold mainly through a 
distributor network. Approximately two-thirds of the value of U.S. machine 
tool sales were accounted for by independent distributors, and the remainder, 
by direct sales. 3/ According to responses to the Commission's questionnaires, 
the share of U.S. producers’ domestic shipments through distributors decreased 
from 40 percent in 1977 to 32 percent in 1982 and distribution to end users 
increased from 39 percent in 1977 to 54 percent in 1982. Distribution by 
other means, mainly through manufacturers' representatives and agents, 
decreased from 21 percent in 1977 to 14 percent in 1982, as shown in table 38. 


Table 38.—Metalworking machine tools: Percentage distribution of U.S. 
producers’ domestic shipments, by market channels, 1977-82 


Year Distributors End users All other Total 


1977 -: 40.0 : 39.0 : 21.0 : 100.0 

1978 -: 37.4 : 43.2 : 19.4 : 100.0 

1979 -: 37.0 : 43.1 : 19.9 : 100.0 

1980 -: 37.1 : 44.7 : 18.2 : 100.0 

1981 -: 36.9 : 45.4 : 17.7 : 100.0 

1982 -: 32.3 : 54.0 : 13.7 : 100.0 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


In contrast, the distribution of U.S. imports of metalworking machine 
tools through distributors increased from 68 percent in 1977 to 72 percent in 
1982; distribution of imported metalworking machine tools to end users 
decreased from 30 percent in 1977 to 25 percent in 1982. Distribution through 
manufacturers' representatives and agents increased slightly, from 2 percent 
in 1977 to 3 percent in 1982, as shown in table 39. 


1/ Commission staff interviews with U.S. machine tool company executives and 
industry analysts. 

2/ Ibid. 

3/ American Machine Tool Distributors’ Association. 
















112 


Table 39.—Metalworking machine tools: Percentage distribution of 
U.S. importers' shipments, by market channels, 1977 and 1982 

(In percent) 


Market channel 1977 1982 


Distributors-: 68.0 : 72.3 

End users-: 29.6 : 24.7 

Other-:_ 2.4 : _ 3.0 

Total-: 100.0 : 100.0 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


According to industry sources, the volume of sales through distributors 
fluctuates from year to year. In periods of increasing sales, many builders 
switch to direct sales in order to reduce sales commissions paid to 
distributors. Conversely, when sales are declining, there is a tendency for 
machine tool builders to reduce full-time sales staff and turn to independent 
distributors, who are paid commissions only for the products they sell. 

Several basic steps in successful sales are qualifying the immediate 
sales prospects, demonstrating the product, providing a competitive price and 
delivery, assuring the customer of effective machine installation, startup and 
maintenance, and ensuring the availability of parts and service. 1/ 

Most machine tool builders utilize a combination of direct-sales offices 
and independent distributors. Direct sales are more likely to take place in 
areas of high customer concentration, whereas independent distributors are 
more likely to be used in areas of low-volume sales. 

A typical distributor employs about four salespersons and sells about 
$4 million a year in machine tools, parts, and accessories. 2/ Distributors 
generally serve specific geographic areas. Independent distributors will 
typically represent several manufacturers’ product lines, both imported and 
domestic. A distributor will attempt to offer a balanced line (a line from 
several manufacturers that includes machines to handle a wide variety of 
machining functions) in a given territory. Often, the sales territory covered 
will vary with different machines. 

The success of a distributor in any given product area depends on the 
training and ability of the salespersons and on the operations of the machines 
they handle. 3/ Another important factor is the salesperson’s knowledge of 
the clients in the area. Distributor salespersons must know which companies 
are using which machines, which companies are expanding current operations or 
adding new production capacity, which companies are growing, and which 
companies are not competitive. Often, manufacturers choose a distributor 
based upon the distributor’s knowledge of his local market. 

1/ Frost & Sullivan, Inc., The United States Market For Foreign Machine 

Tools and Parts . New York, N.Y., June 1980, p 32. 

2/ American Machine Tool Distributors’ Association. 

3/ Commission staff interviews with industry executives. 















113 


Distributors must have service and spare parts capabilities; therefore, 
the relationship between the manufacturers and distributors is very 
important. The manufacturers typically provide product training to 
distributors’ sales and service staff. 1/ They also provide product brochures 
and other marketing tools, such as video tapes of machine tools in operation. 
Other key functions provided by the manufacturer are the development of 
advertising strategy, advertising copy, and other promotional material. The 
manufacturer will often supplement the distributor's advertisements with its 
own advertisements in various trade publications. 

A recent survey of the machine tool industry showed that the most 
important marketing device, as viewed by machine tool builders, is trade 
shows. 27 Personal calls by sales representatives were rated second, followed 
closely by product literature. 3/ Of less importance was business publication 
advertising. Machine tool distributors, however, rated personal visits by 
sales representatives as the most important marketing tool. 4/ This 
difference is understandable, considering the distributors' more direct 
relationship with the end users. Distributors in the Commission's survey 
placed trade shows third, following product literature, as important marketing 
tools. 5/ Recently, U.S. distributors have started to diversify both their 
product lines and services in order to survive in the market. Some machine 
tool distributors are increasing the competence and size of their technical 
staffs in order to take on lines of industrial robots, which are increasingly 
being used in automation in smaller firms. 6/ Other distributors are offering 
such services as machine tool rentals on short-term contracts, as well as 
machining seminars and programming courses. 7/ 

There appear to be four marketing channels through which foreign machine 
tool manufacturers are penetrating the U.S. market. These are selling through 
U.S. importers, U.S. dealers, or through the foreign manufacturer's plant 
salesmen traveling in the United States, and creating a foreign-owned 
subsidiary in the United States and then sell through U.S. dealers or through 
the subsidiary's own sales force. 8/ One estimate of the distribution 
channels of imported machine tools in 1978 is as follows: independent 
importers, 35 percent; affiliated or subsidiary companies, A6 percent; and 
direct factory sales, 19 percent. 9/ 


1/ Ibid. 

2/ Water J. Reed, "Three Views of Machine Tool Marketing," Machine Tool Blue 
Book . 

3/ Ibid. 

4/ Ibid. 

5/ Ibid. 

6/ Stuart F. Brown, "Adapting to Robot Markets," American Metal Market- 
Machine Tool Distributor Section , Apr. 11, 1983, p. 20. 

7/ Bruce Vernyi, "Hard Times Spur Market Changes," American Metal Market- 
Machine Tool Distribution Section , Apr. 11, 1983, p. 22. 

8/ Frost & Sullivan, Inc., The United States Market For Foreign Machine 
Tools and Parts , New York, N.Y. June 1980, pp. 32-35. 

9/ Ibid., p. 11. 












114 


The importer usually handles a large number of machine tool lines, 
several of which are produced by different manufacturers which may be in 
direct competition with each other. The importer usually provides a number of 
services for the customer such as business functions (quotation preparation, 
invoicing, and customer service and so forth); machine installation, field 
service and handling the warranty; and inventory of parts. 

The importer also arranges foreign exchange transactions and financing 
through both U.S. and foreign banking contacts. Financing is arranged for the 
foreign machine tool manufacturer by the importer, which usually saves the 
manufacturer financing costs. However, as in 1980, when there were high 
interest rates, importers faced risks in the areas of foreign exchange, 
forward exchange contracts, and financing. 1/ Forward exchange contracts 
cover the dollar price of machines which are to be delivered in the future. 
When the contract comes due, the importer must purchase the machine or else 
pay penalties. Several reasons why an importer may incur losses on forward 
exchange contracts are late delivery, delayed installation, and withheld or 
delinquent payment by the customer. 2/ Importers, however, offer to foreign 
manufacturers the benefit of easy access to the U.S. market through the 
importer’s sales force, dealers, and distributors. 3/ By selling different 
lines, the importer has a wide variety of contacts both with suppliers and in 
the marketplace, thus allowing a manufacturer easy access to a market without 
having to build a distribution channel. 

Some foreign manufacturers have expressed the view that importers do not 
provide satisfactory sales coverage and that business functions, such as 
invoicing and foreign exchange, are duplications which can be handled at the 
foreign manufacturer’s headquarters. 4/ Some foreign manufacturers have 
established their own U.S. sales companies for direct sales. These companies 
are usually staffed by a resident manager (generally from the foreign 
builder’s plant) and a number of service engineers, sometimes U.S. 
nationals. 5/ Since sales volume is frequently insufficient to justify the 
existance of a sales office which would cover all major market locations, the 
foreign manufacturer might also decide to establish a dealer network. 

Several trends appearing in the U.S. metalworking machine tool industry 
that probably affect the marketing structure in the United States are the use 
of foreign-built components and subassemblies in U.S.-made machine tools, 
licensing agreements which lead to the building of foreign-designed and 
specified machine tools in the United States, and foreign manufacturers 
building their own machines in the United States. 6/ Currently, a growing 
number of foreign firms are manufacturing, or at least assembling, machine 
tools in the United States. In September 1982, for example, the West German 
machine tool builder Scharmann GmbH & Co. set up an assembly plant for its 
line of horizontal machining centers in Carol Stream, Ill. Scharmann*s U.S. 


1/ Ibid., pp. 230 and 231. 

2/ Ibid. 

3/ Ibid., p. 83. 

4/ Frost & Sullivan, Inc., The United States Market For Foreign Machine 
Tools and Parts , New York, N.Y., June 1980, p. 232. 

5/ Ibid., p. 85. 

6/ Robert A. Gale, ’’Distributors Are Prepared for Era of Global Tools,” 
American Metal Market , June 27, 1983, p. 30. 






115 


sales are handled through the same distributor networks the company used 
before setting/up assembly operations in the United States. 1/ Also, in late 
summer of 1982, three other West German machine tool builders established 
operations, including assembly, in the United States—Gebr. Heller 
Maschinenfabrik GmbH, Schiess AG, and Nuertingen. 2/ Currently, at least five 
West German manufacturers have production operations in the United States, and 
about eight have assembly operations. 3/ In February 1983, five Swiss machine 
tool builders established a cooperative and servicing center in Rhode Island, 
with possible assembly operations at a later date. 4/ Japanese metalworking 
machine tool builders are also establishing production and assembly operations 
in the United States. Yamazaki Machinery Works Ltd. owns Mazak Corp. in 
Kentucky and will produce up to 60 units a month in 1984. Yamazaki started 
production in the United States as part of its long-range planning, expecting 
current lower Japanese labor costs to someday equal U.S. labor costs. 5/ 

Makino Milling Machine Co. Ltd. established U.S. production in 1981 by 
acquiring majority ownership of the U.S. firm, LeBlond. Hitachi Seiki Co. 

Ltd. assembles NC lathes in New York. Mitsubishi Heavy Industries Ltd., and 
Toyoda Machine Works Ltd. are producing in the United States through license 
agreements with U.S. machine tool manufacturers. The idea of producing in the 
United States is viewed in Japan as an alternative to confronting U.S. 
protectionist moods. 6/ 

Another recent development is the trend toward the establishment in the 
United States of sales offices for a group of companies. For example, MFL 
Machine Tool Inc. was established in Connecticut for sales and servicing for 
four French firms: Forest, Line, Saint-Etienne, and Berthiez. Both the 
Spanish Machine Tool Builders' Association and the Italian Machine Tool 
Builders Association have established offices in the United States in order to 
promote their members' machine tools. 

The U.S. metalworking macnine tool industry has not traditionally 
oriented its marketing efforts toward exporting its products. After World 
War II, the U.S. machine tool industry typically produced the most 
technologically advanced machine tools of any producing country. Foreign 
purchasers sought out U.S. machine tools to fill their needs, and there was no 
need for U.S. producers to aggressively market their products overseas. In 
addition, the U.S. market was large enough to accomodate almost all U.S. 
production. However, in 1945, a group of U.S. machine tool manufacturers 
formed American Machine Tool Export Associates (AMTEA) to promote the sale of 
their products throughout Latin America. AMTEA was initially organized to 
comply with the Webb-Pomerene Act, which permits associations of manufacturers 


1/ "Germany’s Scharmann Sets Ill. Base for Operations," American Metal 
Market , Sept. 27, 1982, p. 12. 

2/ Ibid. 

3/ Commission staff interviews with corporate officials. 

4/ "Swiss Builders Plan Office in Rhode Island," American Machinist . 
February 1983, p. 31. 

5/ Mutsuki Murakami, "Voluntary Curbs Likely," American Metal Market- 
Jaoanese Machine Tools Supplement , July 11, 1983, p. 3A. 

6/ Ibid. 








116 


or producers to be formed for export trading activities. 1/ However, the 
organization withdrew from incorporation under the Act in 1958. AMTEA 
originally promoted the sale of member company products through local 
representatives in Latin American countries. Currently, the corporation 
maintains a network of branch offices in Argentina, Brazil, Chile, and 
Mexico. The branch offices have fully qualified service personnel for 
installation and servicing of equipment. AMTEA is made up of 11 stockholding 
companies and 11 affiliated companies. 2/ 


THE U.S. MARKET 
Description of the Market 

The United States is the largest single market for metalworking machine 
tools in the world. The market grew during 1977-81, before declining in 
1982. A significant portion of the market was taken by imports as backlogs of 
orders in U.S. production facilities increased. U.S. manufacturers have 
recently taken action to counteract increased import penetration, especially 
in the area of small, standard NC machine tools. 


Consumption 

In 1977, the United States was the second largest consumer of machine 
tools in the world, with consumption valued at $2.4 billion. The Soviet Union 
was the world leader, with consumption at $2.8 billion. 3/ In 1978, the 
United States became the leading consumer of metalworking machine tools in the 
world and has since maintained that position. U.S. consumption increased from 
$3.2 billion in 1978 to $5.6 billion in 1981, and decreased to $4.4 billion in 
1982. 4/ 

Major factors influencing the dramatic increase in metalworking machine 
tool consumption in the United States between 1977 and 1981 were the retooling 
of the U.S. automobile industry and the aircraft industry and heavy demand 
from producers of oil and gas equipment. As indicated in table 40, capital 
expenditures in these industries increased significantly from 1977 to 1981, 
placing heavy demand on machine tool manufacturers. The automobile and 
aerospace industries were developing new, fuel-efficient motor vehicles and 
aircraft, and the oilfield machinery industry was meeting worldwide demand for 
threaded oil well casings and related products. 


1/ 15 U.S.C. 61-66. 

2/ American Machine Tool Export Associates. 

3/ American Machinist , February issues, 1978-83. 
4/ Ibid. 






117 


Table 40.—Capital expenditures in the U.S. aerospace 

/ machinery industries, 1977-82 


automobile, and oil field 


(In billions of dollars) 


Year 

Aerospace 

industry 

Automobile 

industry 

Oil field 
machinery 

Total 

1977- 

2.01 

5.82 

0.26 

8.09 

1978- 

3.22 

7.22 

.30 

10.74 

1979- 

5.27 

8.30 

0.38 

13.95 

1980- 

7.03 

9.06 

0.46 

16.55 

1981 

6.43 

10.08 

1/ 0.35 

1/ 16.86 

1982- 

6.04 

1/ 8.22 

1/ 0.25 

1/ 14.51 







\J Bureau of Economic Analysis projection, U.S. Department of Commerce, 


Source: Aerospace Industries Association, Motor Vehicle Manufacturers Associa¬ 

tion, and the U.S. Department of Commerce. 


U.S. purchasers of metalworking machine tools responding to the 
Commission's survey were basically in those industries that purchase the 
specialized machine tools in which U.S. producers have a competitive 
advantage. They indicated an overwhelming preference for U.S.-made machine 
tools, as is evidenced by comparing data in table 41 with those in table 42. 
During 1977-82, respondents purchased 4.7 billion dollars' worth of U.S.-made 
machine tools and 178 million dollars' worth of imported machine tools. 

The major purchasers of foreign-made "off-the-shelf" machine tools, such 
as lathes and machining centers, are the thousands of job shops, which, 
because of their number, were not contacted for this study. These small 
businesses account for the bulk of foreign machine tool purchases in the 
United States. 

The machine tool market grew during 1977-81 by 243 percent, and the ratio 
of U.S. imports to apparent consumption rose from 17 to 27 percent. In 1982, 
U.S. imports constituted 29 percent of apparent U.S. consumption. Domestic 
producers' U.S. market share decreased from 83 percent in 1977 to 73 percent 
in 1981, and decreased further in 1982 to 70 percent. 


A nalysis of Interaction of Domestic and Foreign Products in the U.S. Market 

U.S. machine tool producers have historically relied on backlogs of 
orders to get them through periods of weak demand. The size of the U.S. 
market and import levels of the period up through the mid-1970’s allowed U.S. 
producers to become accustomed to this buffer of backlogged orders. At the 
end of 1976, the net new-order backlog of the U.S. industry was valued at $1.5 
















118 


billion. 1/ This backlog increased dramatically during the next 4 years and 
peaked at $5.9 billion in April-June 1980. 1/ The demand represented by this 
significant backlog was equivalent to approximately 111 percent of the value 
of total U.S. consumption in 1980 and was more than 2 times that of total 
consumption of machine tools in Japan in the same year. 2/ 

During the 1970’s, competition among Japanese NC machine tool builders 
intensified as industries purchased more and more NC machine tools to offset 
energy and labor cost increases. This intense competition led to lower prices 
for machine tools, and innovations in electronics led to lower prices for NC 
control units. The result was low-priced, competitive NC machine tools. 

With order backlogs in the United States increasing in the late 1970’s, 
there was ample opportunity for foreign-made machine tools to gain a greater 
share of the U.S. market. This was particularly true in the area of small, 
standard NC machine tools, a product line that American manufacturers had 
tended to neglect. 3/ As a result, these Japanese-made machine tools, which 
were (and still are today) technologically comparable with U.S.-made machine 
tools, gained a significant share of the U.S. market. 

There is indication, however, that U.S. machine tool manufacturers are 
beginning to reenter this large market for small NC machine tools. Some U.S. 
producers have taken their high-priced, over engineered machine tools that 
were not competitive and reengineered them and have succeeded in placing good 
quality, price-competitive machine tools on the market. 4/ U.S. builders 
recently displayed small- and medium-sized NC lathes at a show in Hanover, 

West Germany, some of which were priced lower than the comparable Japanese 
lathes. 5/ The increase in imports, as described earlier, seems to have 
stimulated some U.S. producers into intense competitive efforts. 6/ In fact, 
in response to the Commission’s survey, U.S. machine tool builders stated that 
cost reduction and improved quality of the product were the top two actions 
taken in response to foreign competition in both the U.S. and foreign 
markets. Other actions taken by producers included reducing or stopping 
production of noncompetitive products, shifting production to more advanced 
types of machine tools, and eliminating plans to increase production 
capacity. A few producers responded by importing the competitive products or 
opening overseas production facilities. 


1/ NMBTA. 

2/ American Machinist . February 1981, p. 96. 

3/ Ibid., September 1979, p. 117. 

A/ Industry Week . Aug. 9, 1982, p. A6. 

5/ The Japan Economic Journal, Industrial Review of Japan/1982 . March 1982, 
p. 91. 

6/ Anderson Ashburn, American Machinist . November 1980, p. 5. 







119 


Table 41.—Metalworking machine tools: U.S. purchasers’ consumption of U.S.- 

produced articles, by major types, 1977-82 


Item 


1977 


1978 


1979 


1980 


1981 


1982 


Quantity (units) 


Metal-removing :::::: 

machine tools-: 4,481 : 5,182 : 4,830 : 5,041 : 4,097 : 2,952 

Metal-forming :::::: 

machine tools-:_8 18 • _ 869 ♦ _ 971 • 1.060 : _ 841 : _ 720 

Total-: 5.299 : 6,051 : 5.801 : 6, iOl : 4,938 : 3,672 

Value (1,000 dollars) 


Metal-removing :::::: 

machine tools -: 522,988 : 673,413 : 617,653 : 625,356 : 773,656 : 805,082 

Metal-forming :::::: 

machine tools -: 79.427 : 101.649 • 133.872 : 120.747 : 143.622 ; 151,059 

Total -: 602,415 : 775,062 : 751,525 : 746,103 : 917,278 : 956,141 


Source: Compiled from data submitted in response to questionnaires of the 
U.S. International Trade Commission. 


Table 42-—Metalworking machine tools: U.S. purchasers' consumption of imported 

articles, by major types, 1977-82 


Item 


Metal-removing machine 

tools- 

Metal-forming machine 

tools- 

Total- 


Metal-removing machine 

tools- 

Metal-forming machine 

tools- 

Total- 


; 1977 

1978 

• 

• 

1979 

1980 

1981 

1982 


Quantity 

(units) 



: 129 

126 : 

152 

240 

190 

182 

21 

24 : 

36 

26 

28 

59 

: 150 

150 : 

188 

266 

218 

241 

* Value (1,000 dollars) 

: 12,714 

12,259 : 

22,507 

37,180 

20,397 

28,942 

: 8.880 

4.643 : 

4.470 

3.965 

19,525 

2,521 

: 21,594 

16,902 : 

26,977 

41,144 

39,922 

31,463 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 



















































120 


Future Trends 
Next-Generation Products 

Flexible manufacturing systems are becoming increasingly important as a 
means of production in manufacturing industries. The ability of the machine 
tool industry to compete in world markets will depend to a great extent on the 
ability of the industry to provide FMS to those purchasers who demand it. The 
efficient use of CAD/CAM in conjunction with FMS will enable an engineer to 
design a part on a CRT and initiate production of the part almost immediately, 
without setting foot on the shop floor. The Japanese are already very close 
to having such a system in operation. 1/ Only the largest machine tool 
manufacturers with high-volume production and the necessary capital will adopt 
FMS to their own use. Smaller machine tool builders will increase their use 
of machining cells and NC machine tools. 

A very important part of these types of systems are the units that 
control the motion of the machine tools. Some U.S. industry observers believe 
that the United States has fallen behind in control technology. 2/ Others, 
however, believe that U.S. producers have an advantage in this area, because 
U.S.-made controllers are more flexible due to their modular design. 3/ 

In response to the Commission’s survey, U.S. purchasers of metalworking 
machine tools provided the information shown in table 43 regarding future 
purchases of both domestic and foreign-made metalworking machine tools. 


Table 43.—Metalworking machine tools: U.S. purchasers’ estimated future 

consumption, 1983-90 


Year 

Number 

of units 

Value 

Number of 

reponses 



1,000 dollars 


1983 

2,872 

752,645 

87 

1984 

2,457 

634,168 

84 

1985 

2,627 

909,215 

71 

1986 

1,500 

485,234 

56 

1987 

1,620 

534,905 

43 

1988 

1,115 

433,383 

36 

1989 

1,099 

427,007 

33 

1990 

983 

405,530 

32 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


As reported in the Commission’s questionnaire, both the number and value of 
future purchases decline markedly after 1985 (the peak year), and the 
projected values of future purchases are well below the actual value of 

1/ Metalworking; Engineering and Marketing;. January 1983, p. 31. 

2/ The Competitive Status of the U.S. Machine Tool Industry , National 
Academy Press, 1983, p. 52. 

3/ Commission staff interviews with U.S. machine tool company executives. 






















121 


reported purchases in 1982. However, when the units and value are stated as a 
ratio of the number of responses, units per response vary between 27 and 38 
during 1983-90, and the value per response varies between $7.6 million and 
$12.9 million, with values of over $12 million in every year after 1986. 
Although table 43 appears to confirm industry and U.S. Department of Commerce 
forecasts of a decrease of approximately 30 percent in shipments in 1983 (and 
shows an even further decline in 1984), respondents indicate that consumption 
will increase significantly in 1985 and remain at a high level through 1990, 
with the exception of 1986. Most purchasers revealed that capital 
expenditures beyond a 3-year projection were difficult to ascertain because of 
company policy. Some also stated that the state of the economy would play a 
significant role in determining future purchases. 

The increasing use of new materials, such as composites and ceramics, 
will have an impact on both machine tool technology and demand for machine 
tools. The use of ceramics, for instance, ’’could eliminate the need for some 
of the metal drilling, bending, and welding that robots and so-called flexible 
manufacturing systems are designed for." 1/ 


1/ John W. Dizard, ’’The Amazing Ceramic Engine Draws Closer,” Fortune, 

Jul. 25, 1983, p. 79. 
























> 






t 

} 

*. . . t 

u 


* 




























. I 



































* . 































123 


/ 


APPENDIX A 

NOTICES OF INSTITUTION AND TERMINATION OF PREVIOUS MACHINE TOOL 
INVESTIGATION NO. 332-138 AND NOTICES OF INSTITUTION AND 
MODIFICATION OF INVESTIGATION NO. 332-149 




























- 



















125 



study, written statements should be 
submitted at the earliest practicable 
date, but no later than June 30.1982. All 
submissions should be addressed to the 
Secretary. United States International 
Trade Commission. 701 E Street NW„ 
Washington. D.C 20438. 

By order of the Commission. 

Issued: February 11.1982. 

Kenneth R. Mason. 

Secretory. 

|FR Doc. SZ-MOS Fifed l-IT-St *45 mb) 

sujjno coos 7820-es-a 


[332-138] 

Competitive Assessment of the U.S. 
Metalworking Machine Tool Industry 

agency: International Trade 
Commission. 

action: The Commission, on its own 
motion, instituted investigation No. 332* 
138. under section 332(b) of the Tariff 
Act of 1930 (19 U.S.C. 1332(b)). for the 
purpose of gathering and presenting 
information on the competitive position 
of the U.S. metalworking machine tool 
industry. This study will assess the 
Impact of the growing competition from 
imports on the U.S. metalworking 
machine tool industry, explore the 
related development of further 
competition in the industry’s overseas 
markets, and examine the steps that 
have been taken and may be taken to 
counteract these developments. 

EFFECTIVE DATE: February 5,1982. 

FOR FURTHER INFORMATION CONTACT: 

Mr. Donald M Terry, Machinery and 
Equipment Division. U.S. International 
Trade Commission. Washington. D.C 
20436 (telephone 202-523-0262 or 202- 
523-0169). 

written submissions: While there is no 
public hearing scheduled for this study, 
written submissions from interested 
parties are invited. Commercial or 
financial information which a party 
desires the Commission to treat as 
confidential must be submitted on 
separate sheets of paper, each clearly 
marked “Confidential Business 
Information” at the top. All submissions 
requesting confidential treatment must 
conform with the requirements of $ 201.6 
of the Commission's rules of practice 
and procedure (19 CFR 201.6). All 
written submissions, except for 
confidential business information, will 
be made available for inspection by 
interested persons. To be assured of 
consideration by the Commission in this 






126 


Federal Register / Vol. 47, No. 72 / Wednesday, April 14, 1982 / Notices 


1G125 




INTERNATIONAL TRADE 
COMMISSION 

[Investigation No. 332-138] 

Competitive Assessment of the U.S. 
Metalworking Machine Tool Industry; 
Termination of Investigation 

agency: International Trade 
Commission. 

action: Termination of investigation. 

EFFECTIVE DATE: April 7,1982. 

background: The Commission, on its 
own motion, instituted, effective 
February 5,1982, investigation No. 332- 
138, under section 332(b) of the Tariff 
Act of 1930 (19 U.S.C. 1332(b)), for the 
purpose of gathering and presenting 
information on the competitive position 
of the U.S. metalworking machine tool 
industry. This study was to assess the 
impact of the growing competition from 
imports on the U.S. metalworking 
machine tool industry, explore the 
related development of further 
competition in the industry’s overseas 
market, and examine the steps that have 
been taken and may be taken to 
counteract these developments. 

Because of changes in workload and 
staffing limitations, it is not feasible for 
the Commission to continue the aubject 
investigation at this time. Therefore, the 
Commission, on its own motion,has 
hereby terminated the subject 
investigation. 

Notice of the institution of the 
investigation was published in the 
Federal Register of February 18,1982 (47 
FR 7350] 

Issued: April 8,1982. 

By order of the Commission. 

Kenneth R. Mason, 

Secretary. 

|FR Doc S2-1024S Filed 4-13-82; 845 «m] 

BILLING COOL 7020-02-41 









127 


Fede ;i Register / v r oI. 47 , No. 236 / Wednesday, December 8 , 1982 / Notices 


(332-149] 

Competitive Assessment of the U.S. 
Metalworking Machine Tool Industry 

AGENCY: United States International 
Trade Commission. 

ACTION: The Commission, on its own 
motion, instituted investigation No. 332- 
149, under section 332(b) of the Tariff 
Act of 1930 (19 U.S.C. 1332(b)), for the 
purpose of gathering and presenting 
information on the competitive position 
of the U.S. metalworking machine tool 
industry. Ibis study wil) examine the 
factors affecting the present and future 
international competitive position of 
U.S. metalworking machine tool 
producers. It will assess the impact of 
the growing competition from imports on 
the U.S. metalworking machine tool 
industry, explore the related 
development of further competition in 
the industry’s overseas markets, and 
examine the steps that have been taken 
and may be taken to counteract these 
developments. 

summary: 

Background 

A previous investigation of the same 
scope and subject matter was instituted 
on February 5,1982, and notice of 
institution was published in the Federal 
Register of February 18,1982 (47 FR 
7350). However, because of changes in 
workload and staffing limitations, that 
investigation was terminated on April 7, 
1982, and notice of termination was 
published in the Federal Register of 
April 14.1982 (47 FR 16125). 

EFFECTIVE DATE: December 1,1982. 

FOR FURTHER INFORMATION CONTACT: 

Mr. Charles M. West or Mr. Ronald 
DeMarines, Machinery and Equipment 
division, U.S. International Trade 
Commission, Washington, D.C. 20436 
(telephone 202-523-0299 or 202-523- 
0259). 


1 j-** - *' 

Written Submissions: Wbile there is 
no public hearing scheduled for this 
study, written submissions from 
interested parties are invited. 
Commercial or financial information 
which a party desires the Commission to 
treat as confidential must be submitted 
on separate sheets of paper, each clearly 
marked "Confidential Business 
Information" at the top. All submissions 
requesting confidential treatment must 
conform with the requirements of { 201.0 
of the Commission’s Rulee of Practice 
and Procedure (19 CFR 201.0). All 
written submissions, except for 
confidential business information, wil) 
be made available for inspection by 
interested persons. To be ensured of 
consideration by the Commission, 
written statements should be received 
by the close of business on February 1 , 
1963. All submissions should be 
addressed to the Secretary, United 
States International Trade Commission, 
701 E Street NW„ Washington, D.C 
20438. 

Issued: December 3,1982. 

By order of the Commission. 

Kenneth R. Mason, 

Secretary. 

(FR Doc 82-SM71 PU*d 12-7-82. ft46 am] 

BflXJMQ COOC 7020-00-M 


55343 










128 


UM \ 


«* 


Federal Register / Vol. 48, No. 32 j Tuesday, February IS, 1983 / Notices 


6793 



submissions from parties having already 
filed written briefs will be accepted. The 
initial notice of investigation indicating 
the scope of the study, contact persons, 
and other related information was 
published in the Federal Register of 
December 8.1982 (47 FR 55343). 

By order of the Commission. 

Issued: February7.1963. 

Kenneth R. Mason, 

Secretary. 

fF* Doc sa-4075*u»d MMkM nsj 

m i am cooc mu ni u 


[332-149J 

Competitive Assessment of the U.&. 
Metal workios Machine Tool Industry 

agency: United States International 
Trade Commission. 
action: The Commission is extending 
the deadline for the filing of written 
submissions from interested parties in 
the subject investigation from February 
1,1983 to March 1.1983. Supplemental 


INTERNATIONAL TRADE 
COMMISSION 









S978 


Federal Register / Vol. 48, No. 77 / Wednesday, April 20, 1983 / Notices 


Issued: April 11. 1883. 

Kenneth R. Mat on. 

Secretary. 

|FX Doc n-iMOB nwd 4-ia-ftX e«s *m] 
MJLMQ CCOC TWO-OT-M 


[332-149] 

Competitive Assessment of the U.& 
Metalworking Machine Tool Industry. 

agency: International Trade 
Commission. 

action: The Commission will hold a 
public hearing for the purpose of 
affording all interested parties an 
opportunity to present views on the 
competitive position of the U.S. 
metalworking machine tool industry. 

The initial notice of the investigation 
indicating the scope of the study, 
contact persons, and other related 
information was published in the 
Federal Register of December 8.1982 (47 
FR 55343); notice of the Commission’s 
extension of the deadline forthe filing of 
written submissions -from interested 
parties was published in the Federal 
Register of February 15,1983 (48 FR 
8793). 

Public Hearing: A public hearing in 
connection with the investigation will be 
held in the Commission Hearing Room, 
701 E Street NW., Washington, D.C. 
20436, beginning at 10:00 a.m., e.d.ti, on 
June 28,1983, to be continued on June 29, 
1983, if required. All persons shall have 
the right to appear by counsel or in 
person, to present information and to be 
heard. Requests to appear at the public 
hearing should be filed with the 
Secretary, United States International 
Trade Commission, 701 E Street NW„ 
Washington, D.C. 20436, not later than 
June 21,1983. 

Written Submissions: In lieu of or in 
addition to appearance at the public 
hearing, interested persons are invited 
to submit written statements concerning 
the investigation'by June 25,1983. 
Commercial or financial information 
which a submitter desires the - 
Commission to treat as confidential 
must be submitted on separate sheets of 
paper, each clearly marked 
“Confidential Business Information*’ at 
the top. All submissions requesting 
confidential treatment must conform 
with the requirements of S 201.6 of the 
Commission’s Rules of Practice and 
Procedure (19CFR 201.0). All written 
submissions, except for confidential 
business information, will be made 
available for inspection by interested 
persons. All submissions should be 
addressed to the Secretary at the 
Commission’s office in Washington, D.C. 

By order of the Commission. 






















































































APPENDIX B 


CALENDAR OF PUBLIC HEARING 





133 


CALENDAR OF PUBLIC HEARING 


Those listed below appeared as witnesses at the United States 
International Trade Commission's hearing: 


Subject 


Inv. No. 


Metalworking Machine Tool 
332-149 


iiiuub u y 


Date and time: June 28, 1983 - 10:00 a.m. 


Sessions were held in 
national Trade Commission, 


the Hearing Room of the United States Inter- 
701 E Street, N.W., in Washington. 


Domestic: 


Covington & Burling--Counsel 
Washington, D.C. 
on behalf of 


The National Machine Tool Builders' Association 
FIRST PANEL : 

W. Paul Cooper, Chairman of the Board, 

Acme-Cleveland Corporation 

Charles E. Gilbert, Jr., President, 

The Cincinnati Gilbert Machine Tool Co. 

James A. Gray, President, National Machine 
Tool Builders' Association 

SECOND PANEL : 

Nathaniel S. Howe, Senior Vice President and 
Group Executive, Machine Tool Systems Group, 

Litton Industries, Inc. 

Richard T. Lindgren, President and Chief Executive 
Officer, Cross & Trecker Corporation 

Michael W. Davis, President, White-Sundstrand 
Machine Tool Company 

John T. Smith, II ) 

Harvey M. Appelbaum )--0F COUNSEL 

Lawrence T. MacNamara, Jr.) 


more 






134 


Cravath, Swaine & Moore—Counsel 
New York, N.Y 
on behalf of 


Cincinnati Milacron 

Jack J. Earl, General Counsel and Secretary 

Joseph R. Sahid--0F COUNSEL 


Covington & Burling—Counsel 
Washington, D.C. 
on behalf of 


Houdaille Industries, Inc. 

John Latona, Vice President-Law 

Richard D. Copaken) 

Michael P. Richman)—OF COUNSEL 
Oscar Garibaldi ) 


Blodgett & Blodgett--Counsel 
Worcester, Massachusetts 
on behalf of 

New England Butt Company 

NormarvS. Blodgett--OF COUNSEL 


Importers : 

Rode & Qualey--Counsel 
New York, N.Y. 

Opton, Handler, Gottlieb & Feiler--Counsel 
New York, N.Y. 
on behalf of 


Agietron Corporation 
James A. Miller, National Sales Manager 
Rode & Qualey 

Patrick D. Gill— OF COUNSEL 
Opton, Handler, Gottlieb & Feiler 

Lloyd B. Gottlieb—OF COUNSEL 


more 







135 


Wender, Murase & White--Counsel 
Washington, D.C. 
on behalf of 


The Japan Machine Tool Builders' Association 

The Japan Metal Forming Machine Builders' Association 

The Japan Machinery Exporters' Association 

Dr. Harald B. Malmgren, Economic Consultant 

Dr. Sarvel Rosenblatt 

Carl J. Green —OF COUNSEL 

Barnes, Richardson & Col burn—Counsel 
Washington, D.C. 
on behalf of 


The German Machine Tool Builders' Association 

(Verein Deutscher Werkzeugmachinenfabriken e.V.) of 
Frankfurt, West Germany 

Dr. Fred Steiner, Counsel 

Edward E. Martin, Economic Consultant, 

E. E. Martin Associates 

Gunter von Conrad—OF COUNSEL 


H. Henning Vent—Counsel 
Bethesda, Maryland 
on behalf of 


European Committee for Cooperation of the 
Machine Tool Industries (CECIMO) 

Lucien Rama, Secretary General 

H. Henning Vent—OF COUNSEL 


Arnold & Porter—Counsel 
Washington, D.C. 
on behalf of 


The Machine Tool Importers Association of America (MTIAA) 
Stephen A. Lazinsky, President 


Mark J. Spooner—OF COUNSEL 




















































































APPENDIX C 


PORTIONS OF THE TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 
RELATING TO U.S. IMPORT CLASSIFICATIONS OF METALWORKING MACHINE 
TOOLS 


























































139 


Explanation of the rates of duty applicable to metalworking; machine tools and 

parts 

The rates of duty in column 1 are most-favored-nation (MFN) rates, and 
are applicable to imported products from all countries except those Communist 
countries and areas enumerated in general headnote 3(f) of the TSUSA . 1/ 
However, such rates do not apply to products of developing countries which are 
granted preferential tariff treatment under the Generalized System of 
Preferences (GSP) or under the "LDDC” column. 

The rates of duty in the ’’LDDC” column are preferential rates (reflecting 
the full U.S. MTN concession rate for a particular item without staging of 
duty reductions) and are applicable to products of the least developed 
developing countries designated in general headnote 3(d) of the TSUSA which 
are not granted duty-free treatment under the GSP. If no rate of duty is 
provided in the "LDDC ,, column for a particular item, the column 1 rate applies. 

The rates of duty in column 2 apply to imported products from those 
Communist countries and areas enumerated in general headnote 3(f) of the TSUSA . 

The GSP is a program of nonreciprocal tariff preferences granted by the 
United States to developing countries to aid their economic development by 
encouraging greater diversification and expansion of their production and 
exports. The GSP, implemented by Executive Order No. 11888, of November 24, 
1975, applies to merchandise imported on or after January 1, 1976, and is 
scheduled to remain in effect until January 4, 1985. It provides for 
duty-free treatment of eligible articles imported directly from designated 
beneficiary developing countries. Eligible articles are identified in the 
column marked ’'GSP" with an "A" or "A*." The designation "A" means that all 
beneficiary developing countries are eligible for the GSP, and indicates 

that certain developing countries, specified in general headnote 3(c) of the 
TSUSA . are not eligible. 


1/ The only Communist countries currently eligible for MFN treatment are the 

People’s Republic of China, Hungary, Romania, and Yugoslavia. 









140 


TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 


SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. Machinery and Mechanical Equipment 


Page 571 
6 - 4 - F 


G 

s 

P 


I tea 


Stat. 

Suf¬ 

fix 


Subpart 


F. 


Articles 


Units 

of 

Quantity 


1 


Rates of Duty 
LDDC 


2 


Machines for Working 
Metal, Stone, and Other 
Materials 


Subpart P headnotea ; 


1. For the purposes of this subpart — 

(a) the term " machine tool" means any machine 
used for shaping or surface-working — 

(i) metals (including metallic carbides); 
(il) stone, ceramics, concrete, asbestos- 
cement and like mineral materials, 
or glass in the cold; or 
(ill) wood, cork, bone, hard rubber or 
plastics, or other hard materials, 
whether by cutting away or otherwise removing the 
material or by changing its shape or form without 
removing any of it, but does not include rolling 
mills (item 674.20) or the hand-directed or 
-controlled tools provided for in items 674.60 and 
674.70 of this subpart and in item 683.20 of part 5 
of this schedule; and 

(b) the term "metal-working " includes metallic- 
car bide-working. 


Subnart F statiatical notes ; 

1. For the purposes of this subpart — 

(a) " Metal-removing (metal-cutting) machine tools" 
are metal-^rorking machine tools which shape or surface- 
work metal by removing metal either in the form of 
chips, dust, swarf or similar forms or by spark- 
erosion, ultrasonic, electrolytic, or other chipless 
methods; and 

(b) " Metal-forming machine tools " are metal¬ 
working machine tools other than metal-removing (metal¬ 
cutting) machine tools. 

2. In the provisions for machining centers, report 
machine tools for working metal which can carry out 
different types of machining operations by automatic 
tool change whether or not from an indexing turret. 

3. In the provisions for single-station machines 
and multistation transfer machines, report machine 
tools for working metal, classifiable in item 674.32, 
which can carry out different types of machining 
operations by automatic use, simultaneously or 
sequentially, of different unit heads working on a 
fixed-position workpiece (single-station machines) or 
on a workpiece which is automatically transferred to 
different unit heads (multistation transfer machines). 
























141 


Page 572 

6 - 4 - F 
674 10 - 674. 32 


TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 

SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. - Machinery and Mechanical Equipment 


it* 


Scat, 

Suf¬ 

fix 


Articles 


Units 

of 

Quantity 


Rates of Duty 


LDDC 


674.10 


674.20 


674.30 


674.32 


10 

15 

40 

00 


15 

25 

35 

45 


04 


06 

09 

11 

12 


13 

15 


Converters, ingot molds, and casting machines, all 
the foregoing of types used in metallurgy and in 

metal foundries, and parts thereof. 

Casting machines: 

Die-casting machines. 

Other. 

Other....., 


Metal rolling mills and parts thereof. 


17 


18 

19 

22 

23 


Machine tools: 

Mecal-working machine tools: 

Machine tools for cutting or hobbing gears.. 

Used or rebuilt. 

Other: 

Gear hobbers. 

Gear shapers. 

Other. 

Boring, drilling, and milling machines, 

including vertical turret lathes. 

Machining centers: 

Without indexing turret or auto¬ 
matic head-changing capability: 
Vertical-spindle machines 
with a Y-axis travel of: 

Not over 26 inches (660 
ad)... 


Way-type machines. 

Combination boring, drilling, and 
milling machines: 

Used or rebuilt. 

Other: 

With numerical controls or 
facings for nunierical 
controls: 

Horizontal spindle: 
Table type, 
excluding planer 
type. 


Other. 

Other. 

Other: 

Horizontal spindle. 
Other. 


Note: For explanation of the symbol "A" or "A*" in 

Che column entitled "GSP", see general headnote 3(c). 


No. 

No. 

X 


No. 

No. 

No. 

No. 


Over 26 inches (660 mm)... 

Other.. 

Other. 

Single-station machines and multistation 
transfer machines. 


No. 

No. 

No. 

No. 

No. 

No. 


No. 


No. 

No. 

No. 

No. 

No. 


2.32 ad val. 


Free 


352 ad val. 


6.22 ad val. 


7.92 ad val. 


4.92 ad val. 


5.82 ad val. 


302 ad val. 


402 ad val. 


5.12 ad val. 


4.22 ad val. 


302 ad val. 










































142 


TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 


SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. - Machinery and Mechanical Equipment 


Page 573 

6 - 4 - F 
874.32 


Item 


Scat 

Suf¬ 

fix 


Articles 


Units 

of 

Quantity 


Kates of Duty 


LDDC 


674.32 

(con.) 


26 

27 

28 


29 

34 

36 


42 

61 

62 

64 


66 


67 

68 
69 


72 

73 


76 

77 
81 

83 


Machine tools (con.): 

Metal-working machine tools (con.): 

Boring, drilling, and milling machines, 
including vertical turret lathes (con.): 
Drilling machines: 

Used or rebuilt.. 
Other, valued under $2,500 each. 
Other: 

With numerical controls or 
facings for numerical con¬ 
trols. 


Other: 

Multiple spindle. 

Other: 

Radial. 

Upright, excluding 
sensitive (hand- 
directed), turret, 
and deep-hole 
machines. 


Other...... 

Milling machines: 

Used or rebuilt.. 

Other, valued under $2,500 each. 
Other: 

With numerical controls or 
facings for numerical con¬ 
trols.... 


Other: 

Profile, duplicating, 
and die sinking. 


Knee type ................ 

Bed type................. 

Other... 

Boring machines, including vertical 
turret lathes: 

Used or rebuilt....... 

Other, valued under $2,500 each.... 
Other: 

Vertical machines: 

With numerical controls 
or facings for numerical 
controls... 


Other: 


Other... 

r: 

With numerical controls 
or facings for numerical 
controls 


Other. 


Note: For explanation of the symbol "A" or "A*" in 

the column entitled "GSP", see general headnote 3(c). 


No. 

No. 


No. 

No. 

No. 

No. 

No. 

No. 

No. 

No. 

No. 

No. 

No. 

No. 


No. 

No. 


No. 

No. 

No. 

No. 








































143 


TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 


Page 574 

6 - 4 - F 
674.35 


SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. - Machinery and Mechanical Equipment 


icc 


Scat 

Suf 

fix 


Articles 


Units 

of 

Quantity 


Rates of Duty 


LDDC 


A* 


674.35 


02 

03 


07 


09 

11 

12 


13 

14 

15 

16 
18 
21 

22 


Machine tools (con.): 

Metal-working machine tools (con.): 

Other. 

Metal-removing (metal-cutting) 
machine tools: 

Lathes: 

Used or rebuilt. 

Other, valued under $2,500 
each. 

Other: 

Horizontal: 

With numerical 
controls or 
facings for 
numerical con¬ 
trols and with 
a rated horse¬ 
power of: 

Less than 
25. 

25 to 50. 

Over 50. 

Other: 

Engine or 
toolroom. 

Automatic 
chucking 
machines: 

Single 
spindle.. 

Multiple 
spindle.. 
Automatic bar 
machines: 

Single 
spindle.. 

Multiple 
spindle.. 

Other. 

Other lathes: 

With numerical 
controls or facings 
for numerical 
controls. 

Other. 


6! ad val. 


4.4Z ad val. 


302 ad val. 


No. 

No. 


No. 

No. 

No. 


No. 


No. 


No. 


No. 


No. 

No. 


No. 

No. 


Note: For explanation of the symbol "A" or "A* 1 in 

the column entitled "GSP" , see general headnote 3(c). 

























144 


TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 


SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. - Machinery and Mechanical Equipment 


Page 575 


6 - 4 - F 
674.35 




Item 


Stat 

Suf¬ 

fix 


Articles 


Units 

of 

Quantity 


Rates of Duty 


LDDC 


A* 


674.35 

(con.) 


24 

26 


27 


28 


29 

33 


Machine tools (con.): 

Metal-working machine tools (con.): 

Other (con.): 

Metal-removing (metal-cutting) machine 
tools (con.): 

Machine tools for deburring, 
sharpening, grinding, honing, 
lapping, polishing, or otherwise 
finishing metal by means of grind¬ 
ing stones, wheels, abrasives or 
polishing products: 

Used or rebuilt... 

Other, valued under $2,500 
each....... 

Other: 

Gear-tooth grinding and 
finishing machines.. 

Sharpening (tool or 
cutter grinding) 
machines: 

With numerical 
controls or facings 
for numerical 
controls..... 

Other.. 

Honing or lapping 
machines... 


39 


41 


43 


46 


54 


56 


58 

59 


Note: For explanation of the symbol "A" or "A*" in 
the column entitled "GSP", see general headnote 3(c). 


No. 

No. 


No. 


No. 

No. 

No. 


Flat-surface grinding 
machines, in which the 
positioning of any one 
axis can be set up to an 
accuracy of at least 
0.01 mm (0.0004 in.): 
With numerical 
controls or facings 
for numerical 
controls... 

Other: 

Reciprocating- 
table type..... 

Other..... • 

Other machines, in which 
the positioning of any 
one axis can be set up 
to an accuracy of at 
least 0.01 mm 

(0.0004 in.).. 

With numerical 
controls or facings 
for numerical 
controls ........... 


No. 


No. 

No. 


No. 


No. 


Other: 

External cy¬ 
lindrical, in¬ 
cluding 
universal...• 

Internal 
cylindrical.. 

Other ........ 

Other... 


No. 


No. 


No. 

No. 
































145 


TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 


/V 


Page 576 

6 - 4 - F 
674.35 


SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. - Machinery and Mechanical Equipment 


lc« 


Stat 

Suf¬ 

fix 


Articles 


Dales 

of 

Quantity 


Rates of Duty 


LDDC 


674.35 

(con.) 


62 

64 

67 


71 


73 

74 


76 


77 


78 

79 


82 

•83 


84 


86 

87 


88 


89 

91 

92 


Machine tools (con.): 

Metal-working machine tools (con.): 

Other (con.): 

Metal-removing (metal-cutting) machine 
tools (con.): 

Spark-erosion, ultrasonic, elec¬ 
trolytic or other metal-removing 
(metal-cutting) machine tools 
using chipless methods: 

Electrical discharge machines: 
Traveling wire............ 

Other..... 

Other: 

With numerical controls 
or facings for numerical 
controls... 

Other... 

Other metal-removing (metal¬ 
cutting) machine tools: 

Used or rebuilt... 

Other, valued under $2,500 
each..... 

Other: 

With numerical controls 
or facings for numerical 
controls ... 

Other: 

Sawing or cutting- 
off machines. 

Broaching machines... 
Other...... 

Metal-forming machine tools: 

Used or rebuilt.. 

Other, valued under $2,500 each. 

Other: 

Shearing machines, punching 
machines, and combination 
shearing and punching machines: 
With numerical controls or 
facings for numerical 
controls.... 

Other: 

Shearing machines.... 

Other. 

Bending, folding, straighten¬ 
ing, or flattening machines: 
With numerical controls 
or facings for numerical 
controls. 


No. 

No. 


No. 

No. 

No. 
No. 

No. 

No. 

No. 

No. 


No. 

No. 


No. 


No. 

No. 


No. 


Other: 


Press brakes.. 
Bending rolls. 
Other. 


No. 

No. 

No. 


Note: For explanation of the symbol "A" or A* in 

the column entitled "GSP 11 , see general headnote 3(c). 




































146 

TARIFF SCHEDULES OF THE UNITED STATES ANNOTATED (1983) 

SCHEDULE 6. - METALS AND METAL PRODUCTS 
Part 4. - Machinery and Mechanical Equipment 


Page 577 

6 - 4 - F 
674.35 - 674.48 


G 


Stat. 


Units 


Rates of Duty 


s 

Item 

Suf- 








or 




p 


fix 


Quantity 

1 

LDDC 

*> 




Machine tools (con.): 








Metal-working machine tools (con.): 





A* 

674.35 


Other (con.): 






(con.) 


Metal-forming machine tools (con.): 








Other (con.): 








Other metal-forming machine 
tools: 







93 

With numerical controls 
or facings for numerical 
controls. 

No. 







Other: 








Presses: 







94 

Mechanical. 

Other: 

No. 






95 

Vertical 
(single 
act ion), 
except 








gap or 
C-frame, 








hydraulic.. 

No. 






96 

Other. 

No. 







Forging machines: 







97 

Headers and 
upsetters, 
including cold 
headers. 

No. 






98 

Other. 

No. 






99 

Other. 

No. 







Other machine tools: 












A 

674.40 

00 

Reciprocating gang-saw machines. 

No. 

4.7Z ad val. 

3.9Z ad val. 

35Z ad val. 


674.41 

00 

Copying laches used for making rough or 
finished shoe lasts from models of shoe lasts 
and, in addition, capable of producing more 
than one size shoe last from a single size 
model of a shoe last. 

No. 

Free 


Free 

A 

674.42 


Other. 


4Z ad val. 

3Z ad val. 

35Z ad val. 



Machines designed primarily as: 






Woodworking machines: 







10 

Sawmill machines. 

No. 






30 

Plywood and veneer-making 
machines. 

No. 







Other woodworking machines 
valued under $2,500 each: 







32 

34 








Multipurpose machines. 

Saws: 

No. 







36 

Radial arm. 

No. 






38 

Table. 

No. 






Ul c 

46* 

Other. 

No. 






Other. 

No. 






48 

Other. 

No. 






50 

Glass-working machines. 

No. 






60 

Other machines. 

No. 





674.48 

00 

Work and tool holders and other parts of, and 
accessories used principally with, copying lathes 
provided for in item 674.41. 

X. 

Free 


Free 




Note: For explanation of the symbol "A" or "A*" in 




(2nd Supp. 




the column entitled "GSP", see general headnote 3(c). 




4/8/83) 








































147 


APPENDIX D 

BASIC MACHINE TOOL OPERATIONS USED IN U.S. INDUSTRY 





























































149 


drilling and boring 



turning 




Necking and 
Chamfering 

















Face Milling 


: a 


End Milling 




Multiple slotting 



grinding 































Planing 


Slotting 


planing and shaping 


Shaping 



Cutoff Sawing 










































advanced techniques 


Electrical Discharge Machining 


Electrospark. Forming 



forming 


Punching 


Shearing 


































153 


APPENDIX E 

A DISCUSSION OF THE EFFECTS OF EXCHANGE-RATE CHANGES AMONG MAJOR 
U.S. TRADING PARTNERS ON THE COMPETITIVENESS OF U.S. PRODUCTS 








































































































155 


EXCHANGE RATES 


General 

Unless offset by differences in relative inflation rates, changes in - so 
value of the U.S. dollar vis-a-vis foreign currency can alter the 
competitiveness of imports in the United States. For example, a str<« g dollar 
and a relatively high rate of U.S. inflation can cause the dollar to become 
overvalued, increasing the competitiveness of imports in the United States 

To determine if changes in exchange rates have offset changes in 
inflation rates, real exchange rate indexes are often used. These indexes 
deflate changes in nominal exchange rates by changes in relative price 
levels. They show the change in competitiveness between the products of u. 
countries since a base period. Real exchange rates for the U.S. dollar ar 
determined by the following formula: 

Real exchange rate index = Nominal exchange rate index x U.S. price inde x 

Foreign price index 

If the real exchange rate index equals 100, the real value of the U.S. 
dollar has not changed since the base year. If the real exchange rate index 
is less than 100, the dollar is undervalued compared with the base year, and 
U.S. goods in general have become more competitive with foreign goods. The 
index would be less than 100 if either the U.S. price level has fallen 
relative to the foreign price level with no change in nominal exchange rates 
or the value of the dollar has risen in foreign exchange markets with no 
offsetting movement in relative price levels. If the real exchange rate index 
is greater than 100, the dollar is overvalued compared with the base year, a d 
U.S. goods in general have become less competitive with foreign goods. 

The following tabulation shows the real exchange rate indexes for the 
U.S. dollar against the currencies of several countries for the base year 1976. 



Producer 

Nominal exchange 

Real exchange 

Country 

price index 

rate index 

rate index 


(1976=100) 

(1976=100) 

(1976=100) 

United States 

163.6 

. 


Canada 

178.6 

125.1 

114.6 

Italy 

232.6 

162.5 

114.3 

Japan 

129.5 

84.0 

106.1 

Korea 

253.1 

151.1 

97.7 

Spain 

257.6 

164.2 

104.3 

Sweden 

189.4 

144.2 

124.6 

Switzerland 

114.7 

81.2 

115.8 

Taiwan 

157.4 

103.9 

108.2 

United Kingdom 

204.8 

103.2 

82.4 

West Germany 

133.4 

96.4 

118.2 


Source: Compiled from statistics of the International Monetary Fund. 











156 


As shown by the real exchange rate indexes in the tabulation, U.S. goods 
have become less competitive with goods from most foreign countries since 
1976. The average real exchange rate index for the U.S. dollar against the 
foreign currencies is 108.6. This means that the price of imports has gone up 
by about 8.6 percent less since 1976 than the price of U.S. goods. Goods from 
Sweden, West Germany, and Switzerland have enjoyed an especially sharp 
increase in competitiveness since 1976. Only goods from Korea and the United 
Kingdom have lost competitiveness to U.S. goods since 1976. 1/ 


1 J A recent study done by the U.S. International Trade Commission (The 
Effect of Changes in the Value of the U.S. Dollar on Trade in Selected 
Commoditites, Investigation No. 332-150, USITC Pub. No. 1423 (August 1983)) 
found that although changes in exchange rates influence trade, other factors 
such as competitors' prices, product demand, and manufacturing costs are often 
equally important. 



157 


APPENDIX F 
STATISTICAL TABLES 













































. 




































159 


Table F-l.—Metalworking machine tools: 1/ U.S. Air Force acquisitions, 

by sources, fiscal years 1978-82 2/ 


Fiscal year ended Sept. 30— 

Source *- 

; 1978 ; 1979 ; 1980 | 1981 ; 1982 

^ _ • • _ • _ • __ * 

Quantity (units) 


United States-: 76 : 62 : 61 : 68 : 93 

Foreign-:_ 2 : 3/ 4 : _0_:_ 8_ : _12 

Total-: 78 : 66 : _ 61 : 76 : _ 105 

Value (1,000 dollars) 


United States-: 8,326 : 8,996 : 3,879 : 5,271 : 10,564 

Foreign-: 408 :3/ 325 : _ - : 2,688 : 1,991 

Total-: 8,644 : 9,321 : 3,879 : 7,959 : 12,555 


1/ As defined in the Federal Supply Classification for categories 3408-3460. 
2/ Figures cover only direct U.S. Air Force purchases and not those of U.S. 
contractors with Defense Department funding. 

3/ Includes 1 award for machine tool accessories. 

Source: U.S. Department of Defense, Office of the Under Secretary of 

Defense, Research and Engineering, Acquisition Management. 


























160 


Table F-2.—Metalworking machine tools: 1/ U.S. Navy acquisitions, by 

sources, fiscal years 1978-82 2/ 


Source 


United States 

Foreign- 

Total- 


United States 

Foreign- 

Total- 


Fiscal year ended Sept. 30— 

1978 : 1979 : 1980 : 1981 : 1982 

• • • ♦ 

• • • • 

Quantity (units) 

244 

12 

454 

17 

171 

27 

214 

30 

263 

15 

256 

471 

198 

244 

278 

Value (1,000 dollars) 

18,641 

1.345 

18,178 

791 

22,353 

2.488 

24,634 

4.723 

16,276 

3,484 

19,986 

18,969 

24,841 

29,357 

19,760 


1/ As defined in the Federal Supply Classification for categories 3408-3460. 
2/ Figures covers primarily U.S. Navy purchases and not those of U.S. 
contractors with Defense Department funding. 


Source: U.S. Department of Defense, Office of the Under Secretary of 
Defense, Research and Engineering, Acquisition Management. 


























161 


Table F-3.--Metalworking machine tools: 1/ U.S. Army acquisitions, by 

sources, 1978-82 2/ 


• • • • • 

Source * 1978 * 1979 ' 1980 * 1981 ’ 1982 3/ 

• • • • • —- 

. «••i • 

Quantity (units) 

United States-: 265 : 553 : 229 : 267 : 147 

Foreign 4/- 11 : _ 38 : _ 20 : 22 : _8 

Total-: 276 : 591 : 249 : 289 : 155 

Value (1,000 dollars) 

United States-:30,111 : 91,185 : 30,778 :41,455 : 32,784 

Foreign 4/-: 1.694 : 10.916 : 3.409 : 2.021 : 1.186 

Total-:31,805 : 102,101 : 34,187 :43,476 : 33,970 


1/ As defined in the Federal Supply Classification: 3408--machining centers 
and way-type machines; 3410--electrical and ultrasonic erosion machines; 

3411—boring machines; 312—broaching machines; 3413--drilling and tapping 
machines; 3414--gear-cutting and gear-finishing machines; 3415—grinding 
machines; 3416—lathes; 3417—milling machines; 3418--planers and shapers; 
3419--miscellaneous machine tools; 3426--metal-finishing equipment; 3433—gas 
welding, heat-cutting, and metalizing equipment; 3441--bending and forming 
machines; 3442—hydraulic and pneumatic presses, power-driven; 

3443--mechanical presses, power-driven; 3446—forging machinery and hammers; 
3448—riveting machines; and 3449--miscellaneous secondary metal-forming and 
metal-cutting machines. 

2/ Recorded year of machine manufacture. 

3/ Data are incomplete. 

4/ Includes Mainz Army Depot (West Germany) purchases of foreign-made 
machine tools, although the U.S. Army considers these to be domestic 
purchases. Includes French-built lathes mated with U.S.-made controls and 
assembled in the United States, which in the U.S. Army's view qualifies them 
as domestic purchases. 

Source: U.S. Department of Defense, Office of the Under Secretary of 
Defense, Research and Engineering, Acquisition Management. 


























Table F-4.—Metalworking machine tools: 1/ U.S. Air Force acquisition of foreign-made machine tools, 

by sources, fiscal years 1978-82 2/ 


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Table F-5i - Metalworking machine tools: 1/ U.S. Navy acquisition of foreign made machine tools 

by sources, fiscal years 1978 B? 2/ 


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4-7 









































































Table F-6.—Metalworking machine tools: 1/ U.S. Army acquisition of foreign-made machine tools, 

by sources, 197 7-82 2/ 3/ 


164 










1 

| 

1 

1 1 1 

X 













03 


ca 

O' 

in 

00 





00 













3 

o 

Li 

>3“ 

<T 






rH 













pH 

o 

cd 








• 










• 



03 

o 

r-• 


v* 






r— 










as 

N 


> 

• 

rH 


ml 








• *> 


as 






CA 

■al 



pH 

o 








\ 


ca 


c 






3 





T5i 








XI 

• — 

fH 


•r 






a; 

CSI 













ca 

o 


.c 






4- 

oo 

• 












0) 

o 


c 






as 

O' 













c 

4J 


cd 






Q 

rH 


>» 



CM 

CNJ 

fO 

o 

© 

O 

o o o 

00 

•r 



£ 









4J 


u 









X 

os 








4-1 



• r4 


<13 


\ 







o 

c 


00 






o 



4J 


£ 


ml 






xl 

cd 

• r4 











c 


E 









£ 

X 


w 






4J 



03 


3 










o 


as 






c 



3 


Z 









os 

cd 


•o 






0) 



O’ 











a 

£ 


3 






E 














>> 



rH 






-kJ 













X 

ca 


O 






Li 














1 

3 


c 






cd 





ca 

00 

to 

CNI 

m 

i 

1 

1 1 - 1 o 

fH 

>i 

o 


M 






a 



03 

o 

u 

pv. 

p-* 

r- J 




rH rH 

CNJ 

cd 

0) 








0) 



3 

o 

as 


pH 

CN 

m 




o 

3 

c 








a 



r -- 

o 

|H 




• 




• 


cd 


• 

• 








a 


rH 




rH 




CN 

TJ 

pH 


a 

o 





• 



> 

r- 1 

o 









C 

rH 


•H 

o 





-kJ 





*T3 









cd 

as 


4J 

r** 



• 


c 















u 


CA 

• 



Li 


0) 

rH 













ca 

U) 


os 




as 


£ 

00 













Li 

• H 


£ 

uo 



•o 


os 

O' 


>> 



CM 

ro 

fH 


o 

o 

O CM rH 

CNI 

03 

E 


o 

X 



rH 


to 

p— 


4-> 


Li 



P- 1 





CM 

4-> 

i 


•o 

vs 



•H 


cd 



.•-4 


0) 









c 

i 






3 


c 



4-> 


X 









03 

O' 


as 

os 



X 


cd 



c 


£ 









o 

tH 


X 

3 





X 



o3 















pH 



rH 





3 


Z 









tO 

rs 


o 

cd 



o 


c 



O' 











c 



4-> 

> 



o 


o 














• —4 

• • 






4J 


• ^4 













e 

w 


M 






4-> 














..■4 

0) 


C 

• 



OS 


CA 





(A 

CM 


CNI 

i 

CO 

-a 

ro 1 1 

o 

X 

c 


.r-4 

CA 



c 


• H 



0) 

o 

u 

vO 

o 

OO 


o 

uo 

o 

o 

a 

• H 


as 

rH 



• r4 


3 



3 

o 

a3 

in 

O' 



pH 

m 



cd 

X 


Z 

o 



X 


O' 



H 

o 

pH 






• 


• 

£ 

u 



Li 



a 

• 

o 



<e 


rH 






pH 


m 


cd 


4J 

-kJ 



cd 

Li 

4 



> 

r—< 

o 








1 

£ 


cd 

c 



£ 

cd 






tj 









00 




cs 




a; 

- 













xl 

o 

bO 

• 

<A 

o 



• 


to 

o 













•a 

c 

w 

as 




CO 


C 

00 













CO 

• r4 

03 

CA 

o 



• 

X 

• H 

O' 


>i 



CM 

<r 

m 

o 

rH 

m 

0 

0 

I 

o 


rH 


cd 

z 



D 

cd 

Li 

f— 


4-> 


U 








CNI 


rH 

L 

X 





X 

OS 



• f4 


a; 









• • 

• r4 

C 

V 

OS 



cd 

4J 

OS 



4-> 


X 









CA 

E 

W 

L< 

•o 





c 



c 


E 








xl 

c 


cn 

3 

cd 



4-1 

c 

• r4 



as 











o 

1 

03 

CL 

E 



o 

• H 

60 



3 


z 









•H 

P^ 

u 







c 



O' 











4-> 

rH 

V 

rH 

• 



>» 

as 

CzJ 














cd 


cd 

o 

CO 



L 

CA 














a 

CO 


o 

• 



cd 

cd 















• r4 


rH 

X 

X 



•H 

X 






CA 

00 

■a- 

m 

m 

X 

00 

1 1 1 

X 

(4-1 

• » 

o 





•o 

o 

X 



07 

o 

Li 


O' 

00 

CNI 

m 

p-* 


rH 

• ^4 

w 

o 

as 

X 



• r4 

Li 

u 



3 

o 

o3 

rH 

fH 


X 

in 

CNJ 


O' 

ca 

as 

4J 

c 




CA 

3 

L< 



I-* 

o 

fH 

• 



• 


• 


•» 

ca 

X 


• *4 

• r4 



X 

a. 

cd 



eC 


rH 




P“* 


CNI 


o 

cd 

X 

os 

X 

3 



3 


as 



> 

fH 

o 








pH 

rH 

cd 

c 

o 




CA 

rH 

CA 





TJl 








u 

rH 

•H 

cd 

•o 




o 

as 















i 

X 

E 

as 



e 

o 

Cd 

O' 













>> 

1 

o 


4J 



cd 

4J 


r-* 













rH 

X 

03 

CA 

cd 



£ 


• 

O' 


>> 



v£> 

m 

m 

00 

CM 

CM 

0 

0 

0 

OO 

a rH 

£ 

u 

£ 



Li 

as 

as 



4-> 


Li 

rH 







CO 

a 



os 




as 

c 

CA 



• H 


0) 









2 

CO 

1 

•o 

• 



o 

• r4 

c 



4-J 


X 









00 


o 

*r4 

CA 




X 

as 



c 


e 










• • 

X 

CA 

as 



4J 

o 

4-i 



cd 


3 









rH 

w 

<r 

c 

X 



CA 

cd 

os 



3 


Z 









cd 

as 

CO 

o 

cd 



OS 

£ 

a 



O' 











U 

c 


a 

4J 



y 
















03 


•o 


co 




pH 

4-i 













TJ 

X 

c 

>i 


• 


£ 


o 














OS 

a 

id 

g 

•o 

0) 


o 

Li 






CA 

r> 

p^ 

i 

1 

1 

-a 

1 1 1 


Cx- 

cd 


L 

as 

Li 


L 

O 

>» 



03 

o 

Li 


CNJ 




O' 


o 


£ 

• • 

4 

X 

—a 


44 

4-i 

U 



3 

o 

as 

O' 





X 


X 

ca 


c 


• H 

4-J 




cd 



»H 

o 

rH 








• 

Li 

60 

03 

• 

c 

a 


as 

c 

X 



cd 


rH 








rH 

0) 

c 

> 

CO 

=> 

cd 


CA 

03 

as 



> 

r—<1 O 









> 

• H 

• H 

• 


4-1 


cd 

> 

Li 





T> 









o 

T> 

Li 

D 

c 

3 


X 

•H 

u 














o 

C 

■o 


•p4 

C 


IS 

to 

as 

00 














• r4 




cd 


Li 


CO 

P-. 













ca 

Li 

Li 

• 

■o 

E 


3 

X 


O' 


>. 




CNJ 

o 

o 

o 

in 

0 

0 

0 

pH 

pH 

CxO 

as 


01 


• 

a 

o 

Li 

r•* 




Li 








rH 

o 

1 

3 

O 

rH 

as 

OS 


c 

as 



•■4 


03 









o 

i 

o 

a, x 

c 

4J 

pH 


TJ 





X 









X 

m 

a 

as 

£ 

• H 

01 

o 

OS 

c 





E 










pH 


o 

03 

X 

fH 

o 

Li 

=3 



5 


3 









03 

■a 

• 


CA 

o 

Cl x 

3 



3 


Z 









c 

cn 

(A 

>> 

CA 

cd 

£ 


H-> 

01 


O' 











• r4 


as 

£ 

cd 

£ 

o 

a> 

u 

X 

i 












X 

• • 

W 

L 



a 

c 

cd 

4-> 













o 

W 

W 

< 

• 

4-1 

c 

•H 

4-1 






1 

i 

1 

1 

1 

i 

1 1 1 

i 

cd 

os 

03 


OS 

o 

• r4 

X 

3 

4-1 





1 

i 

1 

1 

1 

i 

1 1 1 

i 

£ 

c 

Li 

(0 




u 

C 

o 





1 

i 

1 

1 

1 

i 

1 1 1 

i 


• r4 

a 

c 

cd 

U 

CM 

cd 

cd 






1 

1 

1 

1 

1 

i 

1 1 1 

t 

ao x 


• H 

£ 

cd 

oo 

E 

£ 

as 





1 

i 

1 

1 

1 

i 

1 1 1 

i 

c 

o 

pH 

c« 


as 




LS 





1 

i 

1 

1 

1 

i 

1 1 1 

i 

• r4 

cd 

cd 

X 

X 

>i 

rH 

pH 

4-i 

•*4 

0) 




1 


£ 

1 

1 

i 

1 1 1 

i 


£ 

u 


o 




o 

4-i 

O 




1 

l 

o 

1 

1 

i 

1 1 1 

i 

u 


•H 

CA 

c 

•o 

U 

CA 


4-4 

u 




1 

>. 

TJ 

1 

1 

i 

1 1 1 

i 

o 

txO 

c 

as 

0) 

as 

O 

as 

>> 

o 

3 




•o 

c 

&o \ 

1 

i 

1 1 1 

i 

3 

c 

cd 

•o 

Li 

TJ 

4-i 

TJ 

Li 


C 




c 

o3 

C 


1 

i 

1 1 1 

i 

rH 

•H 

X 

3 

C*4 

Li 


3 

X 


co 




a3 

e 

• r4 


1 

i 

1 ! 1 

rH 

cd 

u 

o 

rH 


0 

cd 

pH 

c 

• • 





pH 

U 

X 


1 

i 

1 1 ! 

a3 

X 

0 

OS 

LS 

4-4 

u 

X 

o 

3 

as 





Li 

o 



! 

i 

1 1 1 

4-> 

0) 

X 

£ 

e 

o 

as 

cd 

c 

O 

LS 





as 

o 

TJ 

as 

1 

i 

1 c c 

o 

X 

1 

i 

W 


as 

a 

w 

u 

L 





N 


OS 

u 

>> 

c 

c as 03 

H 


1 

i 


CA 





3 


XXXCrHOJ.rijTJ 
—i 13 -h d aj X, 00 .W O 

C03DfiuMi-9MHW 


r-tl 


-a 

co 


n 

•a 

r> 


(Ml o 
o 

4-> 


col -ai mi xl 


o 

co 













































Table F-7.—Metalworking machinery and machine tools: Eximbank authorizations, by fiscal years,1977-82 


165 



1 




v£> 

ON 


tH 

o 


• 




•HCX 


CO 


rH 

oo 

ON 

m 

m 

00 



oo 


HOC 

O 

u 



tH 

cn 

CN 

v£> 

00 



o 


O -H 3 

o 

03 


*N 


r> 

* 

* 

r> 





X x O 

o 

tH 


CN 


ON 

tH 

o 

o 

CM | 

CM 

m 


x CO e 


tH 






tH 

tH 



cn 


3 N CO 

r—i 

o 












< 


T3 












u 


CO 


X 

i 


m 

o 

ON 



<r 


X CD 


X 


vD 


o 

co 

m 

m 



tH 

On 

O 3 


03 


CN 



vO 

vO 

X 

\ 

•\ 

X 


a. x 


H 


* 


* 

* 

e> 

r> 

CN | 

CM 

* 

<JN 

X CO 


H 


<r 


CM 

rH 

o 

VnC 



m 

tH 

w > 

r—i 

o 

OD 




rH 


tH 




cn 


1 

•H CO 


X 


cn 

<r 

CM 

m 

m 

CN 



tH 


x c 


CD 


rH 


rH 



tH 



m 


3 0 0 


X 








\ 

\ 



CD X X 


E 








CM | 

CM 



Z X X 


3 












3 CO 
CO N 

1 


Z 

05 


ON 

on 

m 

X 

m 

CO 



CN 


•HCX 



v£> 

On 

H 

ON 


CN 



oo 


HOC 


03 

H 

r—i 

o 

OD 


On 

CM 

CM 

00 

tH 

ON 





0X3 

X x O 

X CO e 

3 N CO 

< 

o 

tH 


r» 

iH 


*N 

m 


‘IT 

tH 

N 

N 

25, 




CO 












H> 

o 

X 


vD 

i 

m 

o 

m 

CM 



co 

00 

U (U 

o 

03 


LPl 


m 

o 


cn 



rH 


O 3 

o 

r—i 


ON 


o 

<r 

rH 

tH 

\ 



ON 

CL tH 

•N 

rH 


r 


r 

r 



CM j 

CN 


f—i 

X CO 

r —1 

O 


m 



\D 

tH 




co 


w > 


T3 






iH 




CN 


1 

X 05 




vO 

co 

cn 

tH 


v£> 



cn 


X c 


03 


rH 


tH 






<T 


300 










\ 



CD X x 










CM | 

CN 



Z X x 














0 03 
03 N 


3 

Z 












1 


CO 


00 

oo 

oo 

00 

m 

X 



CN 


•H p HI 


X 


m 


o 

co 


m 



ON 


X o c 


03 




ON 

CM 

cn 

v£> 



X 


0X3 


H 


* 


a 


* 

#N 

"-- 

'—. 

*N 


X X o 


rH 


m 


ON 


CN 

X 

CM | 

CN 



x CO E 


o 










CN 


3 N CO 


T3 












< 


CO 












HI 

o 

X 


rH 

1 

<r 

co 

m 

X 



cn 


X CD 

o 

CO 


o 


CN 

X 


o 





O 3 

o 

r—i 


00 



cn 

cn 

tH 

--^ 

\ 

cn 

ON 

CL tH 

* 

rH 


#* 


*N 



* 

CM | 

CN 

#> 

r—i 

X co 

rH 

o 






CN 




ON 


W > 






rH 






CN 


1 

•H CO 


X 


vD 

iH 

in 

rH 


xd 



rH 


x e 


CD 


rH 


rH 



tH 



m 


3 0 0 


X 








«M| 




ID X X 


E 








CN 



Z X x 


3 











3 co 
CO N 


Z 


i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

1 

l 

l 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

i 

1 

1 

1 

1 

1 

1 

1 

i 

i 

i 

t 

i 

i 

3 1 

i 

i 

i 

i 

i 

i 

i 





i 

i 

i 

i 

i 

i 

1 cfl 1 

i 





i 

i 

i 

i 

i 

i 

1 

0 1 

i 





i 

i 

l 

i 

i 

i 

1 X 1 

i 




tH 

i 

i 

l 

i 

i 

i 

1 

1 

i 




<j 

i 

i 

i 

i 

i 

i 

1 Mx 1 

i 


0) 

a 




i 

i 

l 

i 

i 

i 

1 

0 1 

l 




>» 

1 

CO 

1 

C/5 

i 

i 

1 (D 1 

i 

c 



HI 

i 

(D 

i 

CD 

i 

i 

1 HI | 

l 

03 



•H 

i 

ID 

i 

•H 

i 

i 

1 CO 1 

i 

4J 



rH 

i 

HI 

l 

U 

i 

i 

i 

J 1 

l 

CO 



•H 

i 

c 

i 

•H 

i 

i 

1 T 

H 1 

i 




u 

i 

03 

l 

tH 

i 

i 

1 MX | 

i 

CO 



03 

i 

X 

l 

o 

i 

i 

1 H | 

i 

CO 



tH 

i 

eO 

i 

a 

i 

i 

1 H I 

i 


cfl 




i 

3 

i 


i 

i 

i 

-I 1 

i 




oo 

CO 

00 

i 

CD 

i 

i 

1 CD | 

i 




C 

c 


l 

u 

CD 

i 

1 O 1 

i 

o 



•H 

CO 

X 

i 

c 

CJ 

i 

1 

i 

I 




o 

O 

CD 

i 

03 

C 

i 

1 TO 1 

i 

CD 



c 

tH 

X 

i 

X 

03 

i 

1 

3 1 

i 

CL 



03 


H> 

a. 

3 

X 

i 

1 CO | 

i 

Jn 



c 

00 

o 

•H 

CO 

3 

i 

1 

(3 

i 

H 



X 

c 


X 

c 

co 

05 

1 CO o 

i 




tH 

•H 

T3 

CO 

•H 

c 

C 

1 CD X 

i 





T3 

c 

<D 


•H 

03 

1 CD X 

i 




CD 

c 

cfl 

X 

E 


o 

1 X CO 

i 




> 

CD 


a. 

X 

E 

tH 

1 

3 a 

i 




•H 


tH 


(D 

X 


CO 03 H 

tH 




H» 

CD 

03 


H 

CD 

Hi 

3 

1 o 

03 




03 

X 

♦H 

c 

i 

HI 

c 

03 03 *H 

HI 




X 


o 

03 

E 

i 

3 

o 

3 X 

o 




CD 

X 

e 


3 

HI 

O 

X 00 X 

H 




a 

C 

03 

X 

•H 

X 

o 


03 





o 

cO 

£ 

e 


o 

05 

tH tH Px 





o 

•H 

03 

ID 

X 

•H 

(X tb 





o 


tH 

C Q 

z 

CO 

a 

u u 



CM 

00 

O' 


e 

o 


c 

•H 3 
X O 

to e 

N CO 


X 01 
O 3 
a .h 
x co 
w > 


i 

•H CO 
X C 
3 0 0 
CD X -H 

z D U 

3 CO 
CO N 


O 

O 

O 


O 

o 

o 


c 

o 


c 

3 

o 

s 

N CO 


CO 


O 

O 

O 


00 


O 

o 

o 


w 


I 

•pH 

X 

3 o 

CD 


3 CO 
CO N 


X 

o 

xt 

u 

a 

< 


c 

o 


c 

3 

o 

e 

N CO 


CO 


o 

o 

o 


o 

oo 


O = 
a "j 

x 5 
w p 


o 

o 

o 


I 

•H 05 

X c 
3 0 0 
QJ X "H 

Z 4J -UJ 


3 CO 
CO N 


05 

X 

CO 


O 

T3 


05 

X 

CO 


O 

■o 


M 

CD 

X 

e 

3 

z 


05 

X 

CO 


O 

TJ 


05 

X 

CO 


o 

X 


I-i 

<D 

XI 

£ 

3 

Z 


05 

X 

CO 


O 

X 


05 

X 

CO 


o 

x 


X 

CD 

X 

E 

3 

Z 




ON 

o 

CD 

cn 



CN 







rH 

v£> 

ON 

m 



CM 

o 








in 




00 

•HI 






#s 


n 

#s 



r 





cn 

CO 

in 


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166 


Table F-8.—Metalworking machine tools: Number of U.S. patents ^runted in 
the U.S. Patent System, by selected countries, 1977-82 1/ 


Country 

1977 

1978 

1979 

1980 

1981 

1982 

Total 

Total--- 

1.501 

1.472 

1.047 

1.352 

1.399 

1.416 

-7,887 

U.S. origin- 

929 

906 

660 

804 

853 

675 

4,827 

Foreign origin- 

572 

566 

387 

548 

546 

441 

3.060 

West Germany—-- 

163 

168 

111 

149 

171 

133 

895 

Japan- 

107 

118 

92 

107 

129 

103 

656 

United Kingdom- 

65 

68 

29 

47 

32 

32 

273 

France- 

45 

31 

17 

43 

33 

24 

193 

Switzerland- 

34 

22 

28 

43 

28 

24 

179 

Sweden- 

28 

35 

20 

26 

27 

23 

.159 

Canada- 

25 

31 

21 

27 

29 

24 

157 

Italy- 

14 

20 

18 

18 

22 

21 

•113 

U. S. S . R- 

22 

19 

17 

21 

15 

9 

103 

Austria- 

10 

9 

4 

15 

13 

9 

60 

Netherlands- 

11 

12 

8 

7 

8 

9 

55 

Australia--- 

12 

7 

4 

11 

4 

7 

45 

South Africa- 

4 

3 

1 

7 

3 

0 

18 

Belgium—-- 

3 

2 

0 

1 

4 

5 

15 

Finland- 

2 

3 

3 

6 

8 

1 

23 

Denmark-.- 

• 2 

1 

3 

2 

0 

3 

11 

Spain--•— - 

6 

1 

0 

0 

3 

0 

10 

Bulgaria- 

4 

2 

0 

0 

1 

1 

8 

East Germany- 

1 

0 

0 

1 

3 

1 

6 

Romania- 

0 

1 

0 

• 0 

0 

0 

1 

All other-- 

14 

13 

11 

17 

13 

12 

80 


1/ Figures include U.S. Patent Classifications 29 (subclasses 26-30); 33, 34, 35.5, 
36-47, 48.5, 49-57, 64, 65, 560, 564-566, 568, 650, and 225 (subclasses 93-106); and 
10, 51, 76, 82, 83, 234,.279, 407, 407, and 409 (all subclasses). 


Source: U.S. Department of Commerce, U.S. Patent and Trademark Office, Office of 
Technology Assessment and Forecast. 



































167 


Table F-9.—Controls for machine tools: 1/ Number of patents granted in the U.S. 

Patent System, by selected countries, 1977-82 


Country 

1977 

1978 

1979 

1980 

1981 

1982 

Total 

Total 

116 

123 

88 

105 

111 

106 

649 









U.S. origin- 

64 

69 

52 

50 

55 

54 

344 

Foreign origin- 

52 

54 

36 

55 

56 

52 

305 

Japan- 

21 

24 

12 

32 

31 

33 

153 

West Germany- 

8 

12 

3 

8 

10 

7 

48 

United Kingdom- 

6 

7 

2 

5 

3 

1 

24 

France—-- 

7 

2 

2 

4 

2 

4 

21 

Switzerland- 

3 

2 

2 

1 

2 

1 

11 

Italy- 

1 

2 

3 

0 

3 

1 

10 

Canada- 

0 

0 

4 

1 

2 

2 

9 

U.S.S.R 

3 

3 

1 

1 

1 

0 

9 

Sweden- 

1 

1 

2 

2 

1 

1 

8 

Netherlands- 

0 

1 

3 

1 

0 

0 

6 

Austria- 

0 

0 

0 

0 

1 

0 

1 

Belgi um---— 

0 

0 

1 

0 

0 

0 

1 


0 

0 

1 

0 

0 

0 

1 

East Germany- 

1 

0 

0 

0 

0 

0 

1 

Finland-- 

0 

0 

0 

0 

0 

1 

1 

All other- 

1 

0 

0 

0 

0 

0 

1 


1/ Figures include U.S. Patent Classifications 318 (subclass 162); 560-579, and 364 
(subclasses 472, 474, 478, and 513). Includes controls for metalworking and 
woodworking machinery as well as some controls for robots. 


Source: U.S. Department of Commerce, and U.S., Patent and Trademark Office, Office 

of Technology Assessment and Forecast. 

































168 


Table F-10.—Numerically controlled lathes: U.S. purchasers’ consumption of 
domestically produced and imported products, 1977-82 


Year 

Domestically 
produced Jk/ 

Imports 2/ 

Total 

Quantity 

Value 

Quantity 

Value 

Quantity 

Value 



Million 


Million 


Million 


Units 

dollars 

Units 

dollars 

Units 

dollars 

1977- 

290 

41.66 

12 

2.15 

302 

43.81 

1978--- 

354 

55.94 

7 

0.64 

361 

56.58 

1979--- 

266 

42.26 

51 

18.61 

317 

60.87 

1980- 

122 

25.32 

12 

2.37 

134 

27.69 

1981- 

203 

54.20 

23 

4.71 

226 

58.91 

1982- 

112 

26.51 

18 

3.71 

130 

30.22 

Total- 

1,347 

245.89 

123 

32.19 

1,470 

278.08 


2/ Based on data from 6 respondents. 

'' ** 

Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


Table F-ll.—Machining centers: U.S-. purchasers’ consumption of domestically 

produced and imported products, 1977-82 


Year 

Domestically 
produced i J 

Imports _2/ 

Total 

Quantity 

Value 

Quantity 

Value 

Quantity 

Value 



Million 


Million 


Million 


Units 

dollars 

Units 

dollars 

Units 

dollars 

1977- 

29 

8.20 

0 

_ 

29 

8.20 

1978- 

72 

20.27 

1 

0.60 

73 

20.87 

1979- 

59 

20.61 

0 

- 

59 

20.61 

1980- 

49 

10.09 

9 

1.72 

58 

11.81 

1981 

51 

14.67 

16 

2.85 

67 

17.52 

1982- 

31 

9.29 

25 

9.98 

56 

19.27 

Total- 

291 

83.13 

51 

15.15 

342 

98.28 


!_/ Based on data from 45 respondents. 
2/ Based on data from 16 respondents. 


Source: Compiled from data submitted in response to questionnaires of the 

U.S. International Trade Commission. 


























































Table F 12 .—Imported metalworking machine tools: Principal foreign sources, by number of responses, 1977-82 


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Compiled from data submitted in response to questionnaires of the U.S. International Trade Commission. 























* a ‘* e ^”^3. Metalworking sachine tools: Sontariff barriers experienced by O.S. producers in foreign Barkers, 

by nu»ber of responses, 1977-82 


Source 

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14 

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4 

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Central and 

















Scveth Azerica 

















^ excluding 

















Mexico): 

















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10 

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9 

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6 

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2 

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1 

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4 

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Brazil- 

23 

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7 

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2 

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7 

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4 

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1 

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1 

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1 


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4 


1 

2 

5 

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2 

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North Axerica and 

















Mexico: 

















Canada- 

- 

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1 

3 

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1 

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1 

1 

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4 

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1 

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15 

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6 

22 

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6 

1 

7 

3 

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4 

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1 

2 

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9 

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4 

1 


“ 

- 


2 

- 






































172 


Source 


Table F-13 



—Metalworking machine tools: Nontariff barriers experienced by U.S. producers in foreign markets 

by number of responses» 1977~82~“Contlnued 


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Product content requirements 
















































173 


Table F-13.—Metalworking machine tools: Nontariff barriers experienced by U.S. producers in foreign markets, 

by number of responses, 1977-82—Continued 


Source 

















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Far East: 

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China (P.R.C.)- 

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India- 

Japan- 

Republic of Korea— 
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Central and 

South America 
(excluding 
Mexico): 

Argentina- 

Brazil- 


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Austria- 

Belgium- 

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France- 

Italy- 

Netherlands- 

Portugal- 

Spain- 

United Kingdom- 

Switzerland- 

Sweden- 

Denmark- 


istern Europe: 

East Germany-- 

Romania- 

Poland- 

Czechoslovakia- 

Hungary- 

Bulgaria- 

Yugoslavia- 


North America and 
Mexico: 

Canada- 

Mexico- 


U.S.S.R- 


Source: Compiled from data submitted in response to questionnaires of the U.S. International Trade Commission. 













































































































































































































































































































































































































































































































































































































175 


APPENDIX G 

NATIONAL SCIENCE FOUNDATION, PRODUCTION RESEARCH PROGRAM, 

FISCAL YEAR 1983 




177 


NSF Production Research Program, FY 1983 


Design 

University of Massachusetts 
University of Illinois 
University of Pennsylvania 
Texas A & M University 
University of Rochester 1/ 

Casting 

University of Michigan 
Georgia Institute of Technology 

Forging 

Battelle Columbus 
University of Texas 1/ 

University of California (Los Angeles) 
University of California (Berkeley) 
University of Massachusetts 
Michigan Technological University 
Dyna East Corp. 

Machining 

Battelle Northwestern 
University of Michigan 
University of California (Berkeley) 
Carnegie-Mellon University 
University of Wisconsin (Madison) 

Hahn Associates - grinding 

(funded by the Small Business Program) 
Michigan Technological University - EDM 

Bin Picking 

University of Rhode Island 


Methods 

Cornell University 
University of Iowa 

Engineering Economy 

Carnegie-Mellon University 

Human Productivity 
SRI International 

Management Effectiveness 

Northwestern University 
Purdue University 

Assembling 

C. S. Draper Laboratory, Inc. 
University of Massachusetts 
Stanford University 
University of Michigan 
Ohio State University 

Joining 

Adaptive Technologies, Inc. 

CRC Welding Systems, Inc. 

University of California (Berkeley) 
Greenbriar Systems, Inc. 
Magnasonics, Inc. 

Bethesda Corp. 

Inspecting 

Raycon Corp. 

SRI International 


1/ Completed. 

Source: W. M. Spurgeon, "Production Research Program, National Science 

Foundation," Tenth NSF Conference on Production Research and Technology, 
Detroit, Mich., March 1983, pp. 10-23. 














178 


NSF Production Research Program, Robot-Related Projects, FY 1933 


Inspection Material Handling 

SRI International University of Rhode Island 

L.N.K. Corp. 

Sparta, Inc. 


Assembly 


Programming in English 


Charles Stark Draper Lab., Inc. 
University of Massachusetts 
Stanford University 
University of Michigan 

Arc. Welding, Sealant or Adhesive 

Application 


Machine Intelligence Corp. 

General Capability 

Purdue University 
University of Rhode Islands 
Robotics Center 


Adaptive Technologies, Inc. 

CRC Welding Systems, Inc. 

University of California (Berkeley) 
General Electric/ Rensselaer 
Polytechnic Institute 
Greenbriar, Inc. 


Economic Feasibility 

Carnegie-Mellon University 


Source: W. M. Spurgeon, "Production Research Program, National Science 

Foundation," Tenth NSF Conference on Production Research and Technology, 
Detroit, Mich., March 1983, pp. 10-23. 


* 










179 


APPENDIX H 


THE EUROPEAN COMMUNITY 
MACHINE TOOL 


S PROGRAM FOR ITS 
INDUSTRY 
















































































181 

- 4 - 

XX. COMMUNITY ACTION: AN OPERATIONAL PROGRAMME OF WORK 

Actions which the Commission has decided to undertake can be grouped 
under six headings: 

1. Revival of investment: an essential framework 

Although the situation varies considerably between Member States, the 
general trend over the past few years has been for Coaaunity production 
facilities - the capital equipaent of European firas - to age in 
coaparison with that of Japanese and Aaerican coapetitors. <1) 


This trend is disturbing all round, but particularly so in the case 
of the aachine tool stock, which, on all the available evidence, is 
becoaing rapidly obsolescent in relation to that of Japan and the 
United States. The level of numerically controlled aachine tools is 
synptoaatic of the situation: in 1980, Japan was using alaost as aany 
of these as France, the Federal Republic of Germany and Italy put 
together, although in terms of production by the aechanical and 
electrical engineering industries Japan's output in that /ear was 
barely 65Z of the coabined output of those three Member States. 

If the decline in investment which is at the root of this phenomenon 
becaae a permanent feature, there would be reason to fear a gradual 
erosion of the Community's industrial base and an increasing loss 
of competitiveness by its manufacturing industry. 

In March 1982, the European Council expressed concern at the weakness 
of productive investment in Europe. Action to revive industrial 
investment is justified both by the need to react to the depressed 
state of the economy and by the grave risk of deterioration in the 
capital goods-producing industries which are caught between weaker 
deaand and keener international competition and can no longer muster 
the resources needed-for technical and structural adaptation. 

The Commission has already sent the Council two coamunications with 
a set of proposal and guidelines on the action needed to promote 
investment. (2) 


(1) Commission working paper II/IIIC82) 387 "The competitiveness of 
the Community industries". 

(2) C0MC82) 365: Commission Communication to the Council on the problem 
of investment; and 

C0MC82) 641: Commission Communication to the Council on initiatives 
for promoting investment. 






182 


• 5 - 

It takes the view that the machine tool industry should be recognized 
as having strategic importance. Its general approach as outlined in 
its communications is therefore that the Methods of support and the 
type of action to be taken Must be designed in a Manner that is 
consistent throughout the Community. This is an essential requirement 
for success, firstly because Measures adopted nationally exert a 
decisive influence, secondly because the overall and sectoral approach 
should coaplement each other. 


With a view to showing how the existing measures can be improved and 
coordinated, the Commission, in collaboration with representatives of 
the industry, has completed an initial study on the effectiveness of 
the schemes already in operation, as perceived by those they are 
designed to help. The Commission is to carry out more detailed 
analyses on this subject, after which it may propose to the Member 
States that they harmonize their procedures, by adopting appropriate 
legal instruments, in order to achieve maximum efficiency and 
compatibility. 

The Commission has of now approved the following actions and guide¬ 
lines on the objectives to be pursued, the methods to be employed 
and the beneficiaries: 

- as regards the objectives, it is essential to remove short-term 
disincentives to investment and to promote the development and 
the rapid diffusion of new technologies throughout production 
processes, in the context of boosting the demand for industrial 
equipment; 

- as to the methods: 

• as far as national mechanisms for promoting investment are 
concerned (of which the weakness is due to the difficulties 
being experienced by the users of production equipment because 
of high interest rates, the lack of capital and cash flow of a 
number of firms and sluggishness in demand) it will be proposed 
to the Member States that they harmonize their laws on lines 
that favour the most effective procedures, i.e., according to 
the operators concerned, systems such as tax allowances for 
investment and the more novel mechanisms introduced in some of 
the Member States (e.g. the MECA system in France, the Sabatini 
Law in Italy, and the United Kingdom's aid scheme for flexible 
manufacturing processes). 

• The Commission for its part will endeavour to ensure that 
companies have adequate access to the resources that can be 
mobilized by the Community's financial instruments. Even now 
productive investments by small and medium-scale undertakings 


183 


- 6 - 

cin be financed by loans from NCI funds or from the EIB itself. 
Recently/ moreover/ (1) the Commission suggested that projects 
eligible for NCI aid should include those that help to strengthen 
the Community's economy/ e.g. by the diffusion of new technologies 
and innovations. Thus the machine tool industry has a twofold 
claim to loans from Community financial instruments: (a) it is 
largely composed of small or medium-sized firms and (b) it is a 
vehicle for advanced technologies. The Commission therefore 
intends to draw the attention of the financial intermediaries who 
distribute EIB or NCI global loans to the importance it attaches 
to this sector. 

. Beneficiaries: Simultaneous action must be taken to assist both 
the producers and the users of machine tools in order to promote 
the best possible correlativity between supply and demand so that 
the manufacturers' ability to use their own products is maintained 
(it is particularly important for the manufacturers themselves to 
be able to use the most advanced equipment). 

2. Hatching supply to demand 

The efficiency of the Community's industrial production system is 
closely dependent upon the quality of its production equipment. 

The process of automating manufacturing industries which started 
a few years ago is rapidly gaining momentum and will have.a major 
impact on the future composition of demand for machine tools. It 
adds to the uncertainty of any assumptions that might be made by 
industrial undertakings and could entail far-reaching changes in 
the organization of production and in relations between the parties 
concerned. 

In commenting on the situation/ the European machine tool industry 
has called for an exploratory study of the market with a view to 
analysing the future composition of demand for machine tools and 
determining how the supply can be matched to it. 


Clearly the industry itself will have to accept full responsibility 
for any such study. In view of the paramount importance of the 
market side of the problem and of the constraints imposed by the 
structure of the sector (many small and medium-sized firms)/ the 
Commission has: 


(1) CON(82) 601 final: Proposal for a Council decision on the New 
Community Instrument. 





184 


- 7 - 


- agreed to the principle of providing logistic and financial support 
for this exploratory survey of the market, provided that the 
Industry takes over the actual running of It - Including its 
implementation; 

- undertaken a methodological study, the results of which will be 
known by the end of 1982: Its purpose Is to define the scope of 
the survey, the terms of reference and the operational methods 
and work patterns to ensure that the means fit the ends. In 
view of the scale of the project it will be impossible to come to 
a decision on all points until thought has been given to shaping 
the terms of reference; 

- requested the Council ar\d the European Parliament to take account 
of the special budgetary requirements which the decision will 
entail. Since they share the Commission's view of the importance 
of the matter, the Council and Parliament have made a token entry 
against the budget item requested for 1983. In order to carry out 
its responsibilities, the Commission will undertake the required 
actions to the extent that the necessary funds may become available 
in the course of Implementing the budget as adopted. (Estimated 
amount: 1.2 Million EUA). 


3. Compatibility of the structural adjustments 

The technological evolution now under way will bring structural 
changes with it. Along with questions relating to the size and 
organization of firms, problems will arise increasingly in connection 
with their financial structure, a factor that crucially affects their 
ability to adapt and grow. In these fields - amalgamations and 
government aids - the Commission has special responsibilities 
resulting from its powers in relation to competition, in the exercise 
of which it will be guided by the outcome of the exploratory survey 
mentioned above. 

Some of the Member States have introduced sector schemes concerned 
with the restructuring of the machine tool industry; incentives are 
offered for inter-company cooperation, usually with support from 
public funds. 

In view of the need to strengthen the competitiveness of the European 
machine tool industry, which is an objective common to all the Member 
States despite the industry's very disparate performance and level 
of development in them, the Commission will endeavour to create 
conditions under which an adjustment of the productive apparatus can 
take place by carrying out its responsibilities along the following 
lines: 

- With regard to state aid, in the present situation the machine 
tool industry is receiving assistance from public funds under 
various headings. The Commission will satisfy itself, when 



185 


- 8 - 

assessing Measures to aid the Machine tool industry notified pursuant 
to Article 93, that *hey provide a compensating Community interest 
in that they respect in principle the prohibition in regard to 
operating aids as provided for in the Treaty. It will re-assess 
the effects and transparency of general or regional systems, which 
may also have considerable impact on industries *Uch as machine 
tools, in order to avoid disparities resulting from support 
procedures rather than the nature pf actual aid. 

- As regards measures to meet the need for closer cooperation upstream 
and downstream of the sector owing to technological evolution and 
the constraints of the competitive situation, * there are likely to 
be major adjustments which only the most competitive and best 
adapted undertakings will be able to cope with. 


For these the changes now under way will mostly entail an increase 
in scale - economic, industrial and financial - for reasons that are 
partly technical (products becoming more.complex in design and 
costlier to produce) and partly commercial (expansion of the sale 
of production systems and standardization of products). The Commission 
will not oppose the resultant structural changes. It will assess 
measures affecting the structure of the sector according to their 
conformity with Articles 85 and 88 of the EEC Treaty. The machine 
tool industry comprising over 2.800 firms within the Community is 
confronted with the adaptation of its structures to the conditions 
required by the research of competitiveness within a Community 
market which must of necessity be kept open. In this respect the 
Commission stresses its positive attitude towards small and medium 
size firms in regard to certain forms of co-operation and/or 
specialization which give favourable results in research, production 
or distribution (1). 

On the third point - improvement of the financial structure of the 
undertakings - it should be noted that most machine tool builders 
in the Community are small or medium-sized firms with two pronounced 
weaknesses: inadequate capital resources and a disproportionate 
amount of short-term debt in their balance-sheets. 

These weaknesses testify to one of the characteristic shortcomings 
of the financial environment of European firms compared with that 
of their Japanese competitors: the difficulty the Community financial 
systems have in procuring long-term, high-risk capital for a sector 


★ See sections I/A/3 and II.C.1 of the attached document. 

(1) Commission notice of 27.5.1970 concerning agreements of minor 

importance, modified by notice of 19.12.1977, O.J. C 313 of 29.12.1977, 
p, 3. Commission notice of 1988 concerning cooperation between firms, 
O.J. C 7? of 29.7.1968 p. 3 corrigendum: O.J. C 84 of 28.8.1968, 
p. 14. Regulation (EEC) No 2779/72 concerning the application of 
Article 85, paragraph 3 of the Treaty on specialization agreements, 
modified by Regulation No ••••••/82 O.J. L ... of ••«••«.. (to be 

published shortly). 






186 


- 9 - 

whose current profitability dojts not permit it to generate sufficient 
funds of its own, while the small scale of the undertakings limits 
their ability to come to the stock market. 

To help find a solution to these problems, the Commission is giving 
thought to the kind of framework within which the whole problem of 
finance for industry could be dealt with, since clearly it is one 
that far exceeds the immediate financing capacity of the Community 
institutions. Only by broad reflection on all the available 
mechanisms for financing businesses in the Community will it be 
possible to define schemes to counterbalance the advantage apparently 
enjoyed by foreign companies in this respect. 

At this juncture, the Commission can say that: 

- it is preparing a set of proposals on the means of easing the 
approach to the financing of innovation in small and medium-sized 
undertakings. The Commission plans to submit to the Council a 
Communication and draft Decision in the spring of 1983* 

A pilot scheme for cooperation between European venture 
capital companies is already available and proposals designed to 
encourage the establishment of an association of these specialized 
financial institutions are now being presented to the Council; (1) 

- companies will find it easier to organize themselves on the 
required economic scale if the European Cooperation Grouping comes 
into being: it is to be hoped that a decision will emerge from 
the Council's examination of this Commission proposal (2) before 
the end of 1983. 


A. Social aspects of the industrial transformation 

The impact of automated production on employment and working conditions 
will, of course, extend far beyond the machine tool sector: it belongs 
to a set of wider social problems raised by the introduction of new 
technologies, and should be examined in that context. 

Whether or not the automation of production is a success is obviously 
directly dependent on its social acceptability and on the willingness 
of all the Industrial operators concerned to carry it further. It 
will, however, largely determine the future competitive ability of 
the European economy and thus the level of employment which the 
Community will be able to maintain in the years ahead, not only in 
industry itself but also in the services linked with, or dependent on, 
industrial production. 


(1) C0M(82)251 final, 15.6.1982. 

(2) Amended proposal for a Council Regulation (EEC) on the European 
Cooperation Grouping, OJ No C 103 of 28 April 1978. 



187 


- 10 - 

As welt as the Initiatives it has already taken in matters relating 
to the Introduction of new technologies, (1) (on which the Council 
is urged to decide without delay), the Commission, noting that 
"automated production systems" seem to diffuse and develop more 
easily where dialogue between the two sides of industry is most 
effectively organized, will lend support to efforts to improve it. 
The EHF and CECIHO will shortly be consulted on the expediency of 
organizing contacts on the subject. 

It will give special attention to solving training problems in 
certain areas of the machine tool industry clearly defined by the 
industry Itself. 

In the more general context of assistance from the Social Fund: 
the Commission's proposals for the reorientation of the Fund 
provide in particular for the grant of assistance to persons 
employed in small and medium-sized firms who need training in new 
skills as a result of the introduction of new technologies that 
substantially alter the production or management methods used in 
them. 

As regards training, the steps that need to be taken to meet 
requirements not at present covered (e.g. the training of systems 
engineers) will be examined in an appropriate setting in the first 
half of 1983. 


5. Diffusion of advanced technologies 

The competitive weakness that threatens the supremacy of the 
European capital goods industry lies mainly in the integration 
of advanced technologies and of electronics in particular. The 
problems in this field are not confined to the technological 
aspects, but take their place in the wider context of the 
market situation and its assessment, and the ability of the 
industries concerned to adapt to the new intersectoral relations 
required and come up with a satisfactory supply of products; the 
problem is one of selection by manufacturers. 


Since there is no possibility of legislating at Community level - 
as has been done in Japan - to promote integration of the mechanical 
engineering and electronics industries, the selection process must 
be helped along by assisting the development of a suitable 
environment• 

The real question is whether the European machine tool industry 
can count on a domestic supply of standardized numerical controls 


(1) See in particular "The new technologies and vocational training: 
new Community initiatives for 1983-87". 





188 


- 11 - 

matching its requirements: the European market for numerical controls 
has been estimated at 100 000 units a year a few years from now 
compared with 12 000 at the present time. 

To find the answer to this question, close concentration will be 
required between the machine tool industry and the manufacturers of 
numerical controls, so that the necessary investment decisions can 
be taken and agreement reached on the standardization of interfaces 
between the machines, the control systems and the operators. The 
implications of this choice for imports of numerical controls and 
the machine tools incorporating them will be considerable. 

To facilitate decision-making, the Commission proposes to: 

- place the topic of investment in the production of numerical 
controls and related questions on the agenda for a forthcoming 
meeting with the manufacturers concerned; 

- begin immediately on a coordination and consultation exercise on 
interface standardization; 

- approach the major machine tool users (motor and aerospace 
industries, etc.) with a view to their harmonizing their 
specifications. 

In the field of research: 

- it is now examining how the needs of the sector can be integrated 
in the 1984-87 outline programme of Community scientific and 
technical projects and in the various action programmes in the ' 
field of advanced technologies (data processing, micro-electronics, 
basic technological research and ESPRIT). (1) In this connection: 

. it has called on the undertakings in the sector to submit 
proposals, jointly with the electronics manufacturers, for ESPRIT 
pilot projects; (2) 

. action to meet the specific requirements of the machine tool 
industry will be proposed in the context of the Community support 
scheme under the data processing programme; 

- the Commission will continue to promote active coordination of 
research support policies in the Member States along the lines 
recently proposed. (3) The Commission will take the initiative in 
arranging talks at Community level between the leading public and 
private sector heads of research in the machine tool field. 


(1) Towards a European strategic programme for research and development 
in information-technologies (C0M(82)287 and 486). 

(2) Especially the projects "Design rules for computer-integrated 
manufacturing systems" and "Integrated microelectronic subsystems 
for plant automation". 

(3) C0N(81)574 final "Scientific and technical research and the European 
Community - Proposals for the 1980's". 




189 


- 12 


6. The external aspects 

The European machine tool industry is the world's leading exporter: 
hence its very survival depends on its ability to compete internationally. 
The industry's net exports are such that to isolate it from international 
competition would be (1) catastrophic. 


The trend in the pattern of trade over the last two years shows a 
decline in its ability to face up to external competition and has given 
rise to commercial tensions in certain vulnerable segments of the 
market. (2) 

The success of the recovery strategy which the European companies have 
embarked on will depend very much on a favourable environment which the 
authorities will help to create at home and abroad. 

The need for more cohesion between the strengthening of industrial 
competitiveness and external strategy was stressed by the Council of 
the European Communities whei, in March 1982, it asked for the setting 
up of a high-level working party to study questions relating to the 
interrelations between structural adjustment and commercial policy, 
having regard to the implications of Japanese export strategy for 
European industry. Along with the motor vehicle industry and the 
manufacture of television sets, the machine tool sector was one of the 
first subjects discussed by the working party. 

For an external strategy to be effective it must be based on the 
Community's ability to reconcile its industrial objectives with the 
maintenance of satisfactory commercial relations from the point of 
view of safeguarding free trade. 

At this stage, the Commission considers that the following points 
should be borne in mind: 

- in the first place, the machine tool industry and, more generally, 
the robotics industry are strategic sectors in which the development 
of technico-economic relations that would place the Community in a 
position of dependence must be ruled out in advance. The only 
possible response to the risk that it may happen is to have 
productive capacity with a sufficient degree of self-sufficiency 
and competitiveness. The question still unanswered is, of course, 
the time required for the necessary adjustment process to come to 
fruition; 


Cl) 2 411 million dollars in 1982. 

(2) The rate of Japanese penetration in the Community market for machining 
centres is estimated by CEC1MO at over 35% in unit terms for 1980 and 
about 30% for numerically controlled lathes, compared with 4.2% and 
17.9% respectively in 1976. 





190 


- 13 - 

- fro* this point of view, the most striking factor is the disparity 
of situations and attitudes within the Community, especially from 
the standpoint of the strategies and policy lines adopted by the 
authorities. We should avoid any measures that would endanger the 
advantage the Community industry now derives fro* the variety and 
fluidity of its internal market or would jeopardize its chances of 
recovery, for which solidarity within the Community is vital. This 
applies both to actions which tend, either overtly or in effect, 
to close off the internal market and also to those that re-open 
the question of the Community's integrity by favouring external 
alliances to the detriment of its industrial solidarity. Often 
these breakaway actions are motivated and justified by the 
intolerable delays in the Community's decision-waking process. 

The Commission will do its utmost to avoid that happening in the 
case of the machine tool* industry. 

The Commission will use to the full all the means at its disposal to 
bring into operation a commercial policy at Community level, 
especially vis-a-vis Japan, on the basis of the guidelines adopted 
by the Council in this regard. 

The European machine tool industry can only maintain its position 
as the leading world producer by adopting a positive attitude to 
counter the general weakness in investment, the increasing 
international competition and the changes brought about by the 
integration of electronics into industrial equipment. 

The Commission, having taken note of the willingness of the 
manufacturers to take this course and their hope in making that 
effort to get assistance at Community level, intends to go along 
with that standpoint and the introduction of such an approach. 

It is in this spirit that it will develop, in the coming months, its 
discussions with the other Community institutions and groups, the 
governments, professional organizations, trade unions and its 
principal trading partners. 


Source: The European Machine Tool Industry, Commission Statement, 

Situation and Prospects, Commission of the European Communities, SEC (83) 
151 Final, Feb. 8, 1983, pp. 4-15. 


ft 39 












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